Domestic and International Information Linkages between Gold Spot and Futures Markets: An Empirical Study for India

Mala Dutt and Sanjay Sehgal

Metamorphosis: A Journal of Management Research, 2018, vol. 17, issue 1, 1-17

Abstract: This article examines information linkages between gold spot market in India and gold futures at India’s Multi Commodity Exchange (MCX) and five international platforms [i.e., Commodity Exchange (COMEX), Dubai Gold and Commodity Exchange (DGCX), Tokyo Commodity Exchange (TOCOM), Hong Kong Exchange (HKE) and Singapore Mercantile Exchange (SMX)] from August 2008 to March 2015. Cointegration procedure and vector error correction model (VECM), supported by Granger causality, are employed to study price discovery process, and bivariate EGARCH-BEKK model is used to examine volatility spillover process. At domestic level, spot market dominates the futures in information transmission process. Internationally, DGCX leads all other exchanges in price discovery process, while COMEX leads in volatility spillovers. In price discovery, MCX leads only TOCOM till August 2013, while price discovery is absent thereafter. In volatility spillovers, MCX dominates TOCOM and HKE till this period and only HKE afterwards. Thus, information linkages between MCX and international exchanges appear to have been impacted severely since August 2013. The study highlights the need to re-establish price and volatility linkages between Indian and international exchanges, and also provides significant suggestions for policymakers. The study is relevant for investors, researchers and the academia. It contributes to market efficiency and information transmission literature for commodity markets.

Keywords: Information linkages; price discovery; volatility spillover; bivariate EGARCH-BEKK model; commodity derivatives (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:metjou:v:17:y:2018:i:1:p:1-17

DOI: 10.1177/0972622518761745

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