An Empirical Study On The Hedging Performance Of China's Gold Futures Market

Gold,as one of the important financial assets,is loved by the majority of investors.Because of gold's good physical characteristics,it is widely used in people's daily life.In the face of changeable gold price,China's gold production and consumption enterprises and many investors badly need financial instruments to avoid this risk.In January 9,2008,China's gold futures began trading in Shanghai Futures Exchange,bringing the long-awaited investors a way to avoid risks.Hedging as an important means of risk aversion,is popular with the majority of investors and businesses of all ages.In recent years,research on China's gold futures hedging emerge in an endless stream.In July 5,2013,the launch of the gold futures market night,leads to the age of the night plate.The trading time changes from the original Monday to Friday Beijing time 9:00-11:30,13:30-15:00,extended to every Monday to Friday Beijing time 9:00-11:30,13:30-15:00,21:00 to the next day 2:30.With the change of the trading time,gold futures trading volume,fluctuations in the range of changes have obvious changes.Based on this,we use the static hedging model least squares method OLS,bivariate vector autoregressive VAR error correction ECM model,generalized autoregressive conditional heteroskedasticity GARCH model,ECM-GARCH model and binary GARCH model to do some research.Through the empirical test on the data of 2009.9-2013.7 and 2013.7-2017.2,the author calculated the hedging ratio in China's gold futures market.Relied on the study of the hedging ratio,the author test and compare the Hedging Efficiency.From the performance of the six models,we can find that before the night plate,the performance of the first six models are around 0.81,after the night plate,the performance of the six models after the night plate are around 0.76.The results indicate that both models can effectively avoid the risk of the spot market.The performance value before the night plate is greater than after the night plate,indicating that before the night plate the hedging effect of the six models is better.From the results of the performance before the night,the OLS model works best in the six models,and the binary GARCH model works the worst.From the results of the performance after the night,the OLS model is best,GARCH(1,1)model is the worst.The empirical results show that before and after the night the OLS model is the best in both models.Compared with other models,the OLS model is simple and convenient to operate.The OLS model do not need to change the hedging ratio as often as the dynamic hedging model,which increases the transaction costs.The author hopes that the research can provide reference to China's vast number of gold investors,gold production,gold consumption enterprises.