Information Flow between Price Change and Trading Volume in Gold Futures Contracts

Ramaprasad Bhar and Shigeyuki Hamori
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Ramaprasad Bhar: School of Banking and Finance, University of New South Wales, Australia

International Journal of Business and Economics, 2004, vol. 3, issue 1, 45-56

Abstract: This article examines the pattern of information flow between the percentage price change and the trading volume in gold futures contracts using daily data over a ten-year period. We employ the robust two-step procedure proposed by Cheung and Ng (1996) to detect the causality in variance. We find evidence of strong contemporaneous causality that is indicative of the mixture of distribution hypothesis of information flow. We also detect, although not as strong, lagged causality running from percentage price change to trading volume. This indicates mild support for sequential information flow as well directed from price change to trading volume. This is contrary to the documented behavior in agricultural futures and crude oil futures, where bi-directional causality has been reported. We hypothesize that this is probably due to the special nature of gold as a commodity and the fact that the gold market takes on added importance when the equity market underperforms.

Keywords: autonomy; price-volume dynamics; spillover; causality; GARCH model (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (7)

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