The Empirical Research Of Connection Between Gold Futures Prices And Gold Stock Prices

The trade of commodity futures is growing, and the formation of price become authoritative.More and more investors have noticed the effect of volatility of commodity prices on the fluctuations of corresponding stock price. They treated the tendency of futures prices as the basis of investment. More and more stocks relate to commodity futures, so the effect of futures market on stock market is getting deeper. On the other hand, the stock market have direct or indirect effects on the futures market. All of those make it extremely important to recognize the relationship between stock market and futures market. This paper set about research by way of gold. This composition begin with the relationship between stock and pricing mechanism of futures, combining with some economic and financial theory which is to study the effect volatility of futures prices on variables. Those variables have a direct impact on certain variables in the pricing model of stock.Finally, this paper may find the mechanism of effect of futures prices on the stock price, as well as the effect of stock price on futures price.In the empirical analysis, this paper studies the short-term and long-term relationship between price of gold futures and price of gold stocks by way of ADF, Engle-Granger, VAR,and ECM.Conclusion of paper as follows:Firstly, gold futures and gold stocks price are non-stationary time series, but their fluctuation of price are stationary time series. Secondly, the relationship between the prices of gold futures and gold stocks is cointegrated, and their long-run equilibrium equation can be draw. Thirdly, their short-term equilibrium equation can be draw by way of ECM.The stock market is deficient for the dependent variables return slowly after deviation from long-term equilibrium.Fourthly, some phenomenon can be discovered after studying the prices of gold futures and gold stocks by way of VAR.The fluctuation of price can be affected by their own rather than each other. The price of gold futures affects gold stocks rather than gold stocks affect gold futures. The effect of explanatory variables which the delayed period is shorter on the dependent variables is even stronger.Fifthly, after distinguishing the effect of gold futures on gold stocks between bull market and bear market by way of VAR,we find that the effect of gold futures on gold stocks in bull market is stronger than in bear market, but the trend of price of gold stocks in bear market is even more evident.