A Study Of Linkage And Linkage Characteristics Of Price In China And Foreign Gold Markets In China And Foreign Gold Mardets

The gold price has been increased greatly in recent years, it hits new record highs and shows huge fluctuations especially after 2008, due to international financial crisis, Greek sovereign debt crisis, the second round of quantitative easing policy launched by U.S.A, riots in Middle East and North Africa. The linkage of price fluctuation in different gold markets becomes the inevitable trend of global economic development. China's gold market, because of its opening to the outside and its own development, has become an important part of and more interrelated and interacted with global gold market. It is a long-term task for China to remove the risk from international gold price fluctuations, enhance its status in and influence on global gold market, and acquire internal pricing of gold. Therefore, it is necessary to study the linkage and linkage characteristics of price in China and foreign gold markets.Based on relevant theories, this paper studies the linkage and linkage characteristics of price in China and foreign gold markets and uses principles of economics to analyzes its mechanism. Using Shanghai gold market and London gold market as examples, this empirical research analyzes the existence of this linkage through cointegration test, Granger causality test and VAR modeling; studies the constancy of price fluctuations through R/S analysis; and discusses aggregation and asymmetry of fluctuations, and relationship between market returns and fluctuations. The result indicates that there is a basic linkage whether China has introduced gold futures or not, i.e. the gold price in China cannot exert its influence on that in London while the international prices have guiding power in that in Shanghai market, however, after China has introduced gold futures the gold price in China tends to have an increasing influence on international gold prices and fluctuate strongly facing foreign shocks. On this basis, this paper does further research on the linkage characteristics of price in China and foreign gold markets. The result indicates that the rate of return in both China and foreign gold markets and daily returns are featured by fluctuation clustering, both China and foreign gold markets are evidently asymmetrical, i.e. market fluctuations are more likely to be increased by positive impact than negative impact,furthermore, GARCH-M effect is obvious in both China and foreign gold markets, equilibrium return level is negative in both China and foreign gold markets, all of those markets are irrational and speculative, and the risk premium in China gold market is higher than that in foreign gold markets.