Market Openness and Market Quality in Gold Markets
Journal of Futures Markets, Forthcoming
41 Pages Posted: 11 Oct 2018
Date Written: September 3, 2018
Abstract
This paper studies the impact of market openness on market quality in gold markets, by investigating the openness event that occurred when the Shanghai Gold Exchange (SGE) launched an international board (SGEI) for foreign investors in China. Investors prefer to trade on the SGE than the SGEI, probably due to the SGE’s higher liquidity. In addition, using the New York Mercantile Exchange (COMEX) gold futures as the benchmark, we show the SGE experiences a significant increase in liquidity without a concomitant increase in volatility. Moreover, the SGE’s contribution to international gold price discovery increases after the openness event.
Keywords: Market openness, Foreign investors, Market quality, Gold markets, Price discovery
JEL Classification: G14, G18
Suggested Citation: Suggested Citation