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Dynamic Price Integration in the Global Gold Market

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  • Chang, Chia-Lin
  • Chang, Jui-Chuan Della
  • Huang, Yi-Wei

Abstract

This paper examines the inter-relationships among gold prices in five global gold markets, namely London, New York, Japan, Hong Kong (since 1 July 1997, a Special Administrative Region (SAR) of China), and Taiwan. We investigate the linkages between Taiwan and the other global gold markets to provide insights for useful investment strategies. The augmenting level-VAR models proposed by Toda and Yamamoto (1995) show that the empirical results find bi-directional causality between the London and New York gold markets, and uni-directional causality from New York to the other markets. In this sense, the New York market has gained a leading role in affecting global gold markets. This empirical finding serves as a predictor for the gold price in global markets.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41627.

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Date of creation: 29 Sep 2012
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Handle: RePEc:pra:mprapa:41627

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Keywords: Global gold market; Dynamic price integration; Toda-Yamamoto Procedure; Augmenting level-VAR models;

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  1. Hammoudeh, S.M. & Malik, F. & McAleer, M.J., 2010. "Risk management of precious metals," Econometric Institute Research Papers, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute EI 2010-48, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, Elsevier, vol. 66(1-2), pages 225-250.
  3. Nicholas Taylor, 1998. "Precious metals and inflation," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 8(2), pages 201-210.
  4. Hammoudeh, S.M. & Yuan, Y. & McAleer, M.J. & Thompson, M.A., 2009. "Precious Metals-Exchange Rate Volatility Transmissions and Hedging Strategies," Econometric Institute Research Papers, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute EI 2009-38, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  5. Capie, Forrest & Mills, Terence C. & Wood, Geoffrey, 2005. "Gold as a hedge against the dollar," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 15(4), pages 343-352, October.
  6. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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  8. Beckmann, Joscha & Czudaj, Robert, 2013. "Gold as an inflation hedge in a time-varying coefficient framework," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 24(C), pages 208-222.
  9. Zapata, Hector O. & Rambaldi, Alicia N., 1996. "Monte Carlo Evidence On Cointegration And Causation," Staff Papers, Louisiana State University, Department of Agricultural Economics and Agribusiness 31690, Louisiana State University, Department of Agricultural Economics and Agribusiness.
  10. James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers, Queen's University, Department of Economics 918, Queen's University, Department of Economics.
  11. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  12. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 251-76, March.
  13. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, Econometric Society, vol. 58(1), pages 113-44, January.
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Cited by:
  1. Chia-Lin Chang & Allen, David & McAleer, Michael, 2013. "Recent developments in financial economics and econometrics: An overview," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 26(C), pages 217–226.
  2. repec:dgr:uvatin:2013021 is not listed on IDEAS
  3. Antunes, João Marques & Fuinhas, José Alberto & Marques, António Cardoso, 2014. "Modelização VAR da volatilidade dos preços do ouro e dos índices dos mercados financeiros
    [Modelling the volatility of gold prices and financial stock indexes: a VAR approach]
    ," MPRA Paper 57017, University Library of Munich, Germany.

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