Determinant Factors Influencing the Commodity Futures Market Returns in India: A Markov Regime Switching Approach

Abstract The study analyses the factors influencing returns in the Indian commodity futures market. It capitalises on various uncertainty factors, including global economic conditions, global real economic activity indices, the Indian volatility index (VIX), world industrial production, geopolitical risk (GPR), Indian economic policy uncertainty (IEPU), and oil price uncertainty (OPU). Further, the study uses monthly futures closing prices for eleven actively traded agricultural and non-agricultural commodity futures. Next, we consider the monthly uncertainty factors data from January 2012 to March 2024. The study employs the dynamic Markov Regime Switching model and Transition Probability. The results document mixed outcomes in the low- and high-volatility regimes.