A Study on Volatility of Spot Price of Turmeric using GARCH Model

187 ISSN No. 2349-7165 Turmeric is known as curcuma longa in the family Zingiberaceae. India is the largest producer and exporter of turmeric in the world, produces nearly 80-85% of world's turmeric crop. Andhra Pradesh, Tamil Nadu, Orissa, Karnataka are the major producers of turmeric in India. Turmeric is used in several ways as a flavor, color to foodstuffs, cosmetics and in medicines. Indian Turmeric is considered as one of the good quality due to its high curcumin content and being known for its medicinal and cosmetic applications. The data are analyzed from 2004 to 2016 from NCDEX . Spot returns of turmeric volatility is modeled as a GARCH (1,1) process.The study examines the long run and short run relationships between the spot and future prices. To examine the relationship among spot volatility and unexpected futures trading activity GARCH (1,1) model is being used. Granger causality test is used to analysis the causality flows from unexpected traded volume to spot volatility and unexpected open interest to spot price return. Further the results came shows the long run relationship among the variables. This leads to study the granger causality between the future and spot prices. The results occurs will shows the effects on the interest of traders, investors and other regulatory bodies. Introduction Turmeric its botanical name is curcuma longa which belongs to zingiberaceae family, grows in red soils with temperature ranging between 20 to 30 degrees. Turmeric is used as cosmetics,in medicines and as a flavor and color in foodstuffs. India is the world's largest producer of turmeric which contributes 80-85% of world's total population, which stands 6.0 lakh MT to 7.0 lakh MT per year. India is not only known for the production of turmeric but it's a world largest exporter country. The major producers of turmeric are Pakistan, China, Haiti, Jamaica, Peru, Taiwan and Thailand. Asian countries consume turmeric for domestic use. Indian Turmeric is considered as the best quality due to its high curcumin content and is widely known for its medicinal and cosmetic applications. Andhra Pradesh, Tamilnadu, Orissa, West Bengal , Karnataka ,Maharashtra are the leading producing states in India for turmeric.UAE, USA, Bangladesh, Sri Lanka, Japan, Malaysia are the major export markets for turmeric. Within the country, Andhra Pradesh leads in the production of turmeric, with an average of 55-57% of the total production. Turmeric is widely used in a dried, powdered form as food adjunct imparting flavor as wellas color to food stuff. Leaves of turmeric are also used to wrap and cook food in someparts of India. Turmeric oleoresin, which is obtained by solvent extraction of the groundspice, is used in pickles, mayonnaise and relish formulations, non-alcoholic beverages, butter and cheese etc. The futures trading of turmeric in India was launched in April 2004 on NCDEX and since it shows a huge participation from various supply chain participants. With the help of futures platform producers can minimize their price risk. Increasing rate of export demand, exporters can insure themselves against price risk Puja Sharma E-mail : puja2487@gmail.com