An Empirical Research On Volatility Spillover Effect Between Chinese Gold And Silver Futures

The Shanghai Gold Exchange officially listed on October30,.2002, which marksChinese gold market had been open completely,and gold investment had a newbeginning. Gold futures had been launched on the Shanghai Futures Exchange in ChinaOn January9,2008. Subsequently, silver futures was officially launched on May10,2012. Gold and silver futures introduced to our country is of great significance for theimprovement of the precious metals market system and the price formation mechanism.At the same time, due to the impact of financial crisis, our country added a lot of moneyto the market,which led to the excess liquidity and generated a certain amount ofinflation. In order to stabilize the development of the market in our country after2010,our country made a series of measures which makes a large number of idle capitalinflows to the precious metals market, once bringing the price of gold to rise, at thesame time, under the influence of various factors, silver investment also appearsexplosive growth.Based on the above background, this article establishes VAR-GARCH-BEKKmodel and makes Granger causality test for studying whether has a volatility spillovereffect between gold and silver futures in China. The result shows that, first,gold futuresis the Granger cause of silver futures, and silver futures is the Granger cause of goldfutures, which explains that the history information of the two markets would hadprediction effect to each other; Second, volatility spillovers exist from gold futures tosilver futures, and it also exists from silver futures to gold futures. Meanwhilebidirectional volatility spillover effect exists between two markets, but China’s goldfutures for silver futures volatility spillover is more significant.In this paper, the main innovation is, under under the background of high inflationand negative interest rates, investors are more and more concerned about currencyhedging function. For the increase of the scale of investment in precious metals, theprice volatility on the the precious metals market is increasing. And because the futuresmarket has the function of price discovery, therefore this paper focuses on study of goldand silver futures volatility relations. This topic is important for investors.Main framework of this paper is as follows: the first chapter mainly explain thebackground, research purpose and significance of this paper, and this paper summarizesthe current research about gold and silver, meanwhile it is proposed the main research contents, structure arrangement and the main innovation. The second chapter overviewsgold and silver market briefly, and analyzes the factors of changes in prices of preciousmetals. The third chapter mainly analyzes the cause of the volatility spillover effect. Thefourth chapter mainly introduces the model of volatility spillover effect. The fifthchapter has empirical analysis about volatility spillover on China’s gold futures andsilver futures market. The sixth chapter summarizes the full text.