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Gold and Oil Futures Markets: Are Markets Efficient?

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Author Info

  • Paresh Kumar Narayan

    ()

  • Seema Narayan
  • Xinwei Zheng

Abstract

In this paper we examine the long-run relationship between gold and oil spot and futures markets. We draw on the conceptual framework that when oil price rises, it creates inflationary pressures, which instigate investments in gold as a hedge against inflation. We test for the long-run relationship between gold and oil futures prices at different maturity and unravel evidence of cointegration. This implies that: (a) investors use the gold market as a hedge against inflation, and (b) the oil market can be used to predict the gold market prices and vice versa, thus these two markets are jointly inefficient, at least for the sample period considered in this study.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2010_13.pdf
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Bibliographic Info

Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2010_13.

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Date of creation: 16 Jul 2010
Date of revision:
Handle: RePEc:dkn:econwp:eco_2010_13

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Related research

Keywords: Gold; Oil; Spot and Futures Markets; Inflation; Cointegration;

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References

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Citations

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Cited by:
  1. Paresh Narayan & Russell Smyth, 2014. "Applied Econometrics and a Decade of Energy Economics Research," Development Research Unit Working Paper Series 21-14, Monash University, Department of Economics.
  2. Reboredo, Juan C., 2013. "Is gold a hedge or safe haven against oil price movements?," Resources Policy, Elsevier, vol. 38(2), pages 130-137.
  3. Kannan Thuraisamy & Susan S Sharma & Huson A Ahmed, . "The relationship between Asian equity and commodity futures markets," Financial Econometics Series 2012_07, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  4. Ewing, Bradley T. & Malik, Farooq, 2013. "Volatility transmission between gold and oil futures under structural breaks," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 113-121.
  5. Kristoufek, Ladislav & Vosvrda, Miloslav, 2014. "Commodity futures and market efficiency," Energy Economics, Elsevier, vol. 42(C), pages 50-57.
  6. Libo Yin & Liyan Han, 2013. "Exogenous Shocks and Information Transmission in Global Copper Futures Markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 33(8), pages 724-751, 08.
  7. Souček, Michael, 2013. "Crude oil, equity and gold futures open interest co-movements," Energy Economics, Elsevier, vol. 40(C), pages 306-315.
  8. Zhang, Chuanguo & Chen, Xiaoqing, 2014. "The impact of global oil price shocks on China’s bulk commodity markets and fundamental industries," Energy Policy, Elsevier, vol. 66(C), pages 32-41.
  9. Thai-Ha Le & Youngho Chang, 2011. "Oil And Gold: Correlation Or Causation?," Working Papers 22, Development and Policies Research Center (DEPOCEN), Vietnam.
  10. Arouri, Mohamed El Hedi & Hammoudeh, Shawkat & Lahiani, Amine & Nguyen, Duc Khuong, 2013. "On the short- and long-run efficiency of energy and precious metal markets," Energy Economics, Elsevier, vol. 40(C), pages 832-844.
  11. Narayan, Paresh Kumar & Liu, Ruipeng, 2011. "Are shocks to commodity prices persistent?," Applied Energy, Elsevier, vol. 88(1), pages 409-416, January.
  12. Jozef Barunik & Evzen Kocenda & Lukas Vacha, 2013. "Gold, Oil, and Stocks," Papers 1308.0210, arXiv.org, revised Mar 2014.
  13. Shu-Mei Chiang & Chi-Tai Lin & Chien-Ming Huang, 2013. "The Relationships Among Stocks, Bonds and Gold: Safe Haven, Hedge or Neither?," Diversity, Technology, and Innovation for Operational Competitiveness: Proceedings of the 2013 International Conference on Technology Innovation and Industrial Management, ToKnowPress.

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