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2012•SSRN Electronic JournalOpen access

Price Discovery and Asymmetric Volatility Spillovers in Indian Spot-Futures Gold Markets

P. Srinivasan, Patmawati Ibrahim

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Abstract

This study attempts to examine the price discovery process and volatility spillovers in Gold futures and spot markets of National Commodity Derivatives Exchange (NCDEX) by employing Johansen’s Vector Error Correction Model (VECM) and the Bivariate ECM-EGARCH(1,1) model. The empirical result confirms that the spot market of Gold plays a dominant role and serves as effective price discovery vehicle. Besides the study results show that the spillovers of certain information take place from spot market to futures market and the spot market of gold have the capability to expose the all new information through the channel of its new innovation.

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What this paper is about

This study attempts to examine the price discovery process and volatility spillovers in Gold futures and spot markets of National Commodity Derivatives Exchange (NCDEX) by employing Johansen’s Vector Error Correction Model (VECM) and the Bivariate ECM-EGARCH(1,1) model. The empirical result confirms that the spot market of Gold plays a dominant role and serves as effective price discovery vehicle. Besides the study results show that the spillovers of certain information take place from spot market to futures market and the spot market of gold have the capability to expose the all new information through the channel of its new innovation.

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OpenAlex reports 11 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

This study attempts to examine the price discovery process and volatility spillovers in Gold futures and spot markets of National Commodity Derivatives Exchange (NCDEX) by employing Johansen’s Vector Error Correction Model (VECM) and the Bivariate ECM-EGARCH(1,1) model. The empirical result confirms that the spot market of Gold plays a dominant role and serves as effective price discovery vehicle. Besides the study results show that the spillovers of certain information take place from spot market to futures market and the spot market of gold have the capability to expose the all new information through the channel of its new innovation.

Key concepts: Price discovery, Futures contract, Spot market, Spot contract, Volatility (finance), Economics, Error correction model, Commodity market

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