Empirical Tests On Weak Form Efficiency Of Shanghai Gold Market

Since the economy of US and Europe recovers slowly, the value of dollar and euro is getting weak recently, gold prices have been rising under the influence of the international financial crisis. In order to preserve and appreciate investment capital, most investors have focused on the gold market. Currently, gold futures prices have exceeded 1,300 USD per ounce; the domestic price of pure gold over 350 CNY per gram. The efficient markets are very important for those investors who want to avoid price risk via these markets, because the efficient markets represent that the functions of the markets can operate smoothly, and that the cost of transactions can be lower for investors. Shanghai gold market is a vital place for the domestic investors; its efficiency is closely related with the interests of investors. Therefore, it is necessary to test the efficiency of Shanghai gold market.The paper takes Shanghai gold spot market and Shanghai gold futures market as the objects of study, to explore whether the Shanghai gold market in accord with the hypothesis of the efficient market. In research methods, the study respectively in terms of whether the price can be forecasted, whether the investors can get excess return, and whether the price discovery function of futures market realize these three angles, adopt random walk test, technical analysis test, co-integration test to verify the weak form efficiency of the Shanghai Gold Spot market and gold futures market. The empirical results show that the prices of Shanghai gold spot and gold futures are non-stationary series, conform to the RWIII stage of random walk and their first order difference are stationary series. Through the further analysis on the auto-correlation test and runs test, the efficiency of gold spot market is higher than that of gold futures markets; In technical analysis test, via MACD, KD, and VHF these 3 kinds of indicators, investors can not gain excess return from both Shanghai gold spot market and gold futures market. It shows that the two markets all meet the weak form efficiency, because their prices can not be predicted; In the co-integration test, Shanghai gold futures market and Shanghai gold spot market have long-term equilibrium relationship, however, they are still exist non-efficiency factors; According to Granger test, Impulse response, Variance decomposition, Shanghai gold futures market has not realized the price discovery function properly, greatly influenced by the gold spot market. The paper analyzes the conclusions of various test methods, and gets a final conclusion that Shanghai gold spot market has basically reached the weak form efficiency, while the gold futures market has not achieved.