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The importance of belief dispersion in the response of gold futures to macroeconomic announcements

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  • Smales, Lee A.
  • Yang, Yi

Abstract

We investigate the behaviour of gold futures around the release of macroeconomic announcements. Market activity, in terms of traded volume, returns, and volatility, responds to new information quickly, with the majority of the reaction complete within 90-s. Surprises on the announcement of unemployment rate and GDP have the largest impact. Contrary to prior results for the equity market, gold futures exhibit greater reactions to ‘good’ economic news (which is negative for gold prices) and the magnitude of the response does not appear to increase during recession. Importantly, we employ a novel measure of belief dispersion, and we are able to demonstrate that the market response to macroeconomic news is significantly larger when belief dispersion is wider.

Suggested Citation

  • Smales, Lee A. & Yang, Yi, 2015. "The importance of belief dispersion in the response of gold futures to macroeconomic announcements," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 292-302.
    • Handle: RePEc:eee:finana:v:41:y:2015:i:c:p:292-302
    DOI: 10.1016/j.irfa.2015.01.017
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    6. Lyócsa, Štefan & Molnár, Peter & Plíhal, Tomáš & Širaňová, Mária, 2020. "Impact of macroeconomic news, regulation and hacking exchange markets on the volatility of bitcoin," Journal of Economic Dynamics and Control, Elsevier, vol. 119(C).
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    8. Dimitrios I. Vortelinos & Konstantinos Gkillas, 2018. "Intraday realised volatility forecasting and announcements," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 9(1), pages 88-118.
    9. Akihiro Omura & Neda Todorova, 2019. "The quantile dependence of commodity futures markets on news sentiment," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(7), pages 818-837, July.
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    14. Smales, L.A., 2017. "Commodity market volatility in the presence of U.S. and Chinese macroeconomic news," Journal of Commodity Markets, Elsevier, vol. 7(C), pages 15-27.
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    More about this item

    Keywords

    Gold futures; Macroeconomic announcements; Belief dispersion; COMEX; High-frequency;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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