Linkages between Gold Futures Traded in Indian Commodity Futures Market and International Commodity Futures Market

Pankaj Sinha and Kritika Mathur

MPRA Paper from University Library of Munich, Germany

Abstract: Given that gold futures contracts are one of the most actively traded commodity futures in the Indian Commodity market, it is of crucial importance to study the price, return and volatility spillover behaviour of gold traded in the Indian commodity market with respect to the International commodity market. The current study tries to study the linkages in Gold futures which are traded on Indian commodity exchange – Multi Commodity Exchange (MCX) and International commodity exchange – New York Mercantile Exchange are analysed. The study attempts to demonstrate the linkages in price, return and volatility across the two markets for the precious metal through three models: (a) Price – Co-integration methodology and Error Correction Mechanism Model (ECM); (b) Return and Volatility – Modified GARCH model; (c) Return and Volatility – ARMA-GARCH in Mean model – Innovations Model. Empirical analysis indicates that there is a presence of a long run relationship between prices of Gold futures contracts traded in MCX and NYMEX. Apart from cointegration in prices, return and volatility spillovers between MCX and NYMEX are found to be significant and bi-directional.

Keywords: Futures; Gold; Spillover; Transaction costs (search for similar items in EconPapers)
JEL-codes: G14 G15 L61 Q02 (search for similar items in EconPapers)
Date: 2016-08-11
New Economics Papers: this item is included in nep-agr
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