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Abstract
This paper has examined the Samuelson’s hypothesis which states that the price volatility increases as the
contract nears its maturity. It has also examined the BCSS hypothesis which provides that negative
covariance between the spot price and net cost of carry explains the maturity effect. The study has
examined these hypotheses on the data for wheat and pepper futures contract traded at NCDEX from the
date of listing of the contract to 31st March 2007 and the maturity effect has been examined for each
contract individually. The study has indicated that maturity effect is present in around 45 per cent of the
wheat and pepper contracts. Evidence supporting the BCSS hypothesis is present more strongly in the
case of wheat as compared to pepper and 79 per cent of the contracts having maturity effect have depicted
negative covariance in the case of wheat. Thus, it can be concluded that maturity effect is present and it is
explained to a large extent by the negative co-variance between spot price and net carry cost. The study
has observed that there is further scope for research in this area in relation to other agricultural commodities
and also metals. Further studies can also be undertaken to find the informational efficiency and the
reaction of informational flow to identify the reasons for the presence or absence of maturity effect.