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Mathematical Problems in Engineering
Volume 2015 (2015), Article ID 646239, 8 pages
http://dx.doi.org/10.1155/2015/646239
Research Article

Low-Frequency Volatility in China’s Gold Futures Market and Its Macroeconomic Determinants

1College of Economics and Management, South China Agricultural University, Guangzhou 510642, China
2Department of Agricultural Economics and Agribusiness, University of Arkansas, Fayetteville, AR 72701, USA
3Department of Economics, University of California, San Diego, CA 92093, USA

Received 8 February 2015; Accepted 21 May 2015

Academic Editor: Reik Donner

Copyright © 2015 Song Liu et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We extract low- and high-frequency volatility from China’s Shanghai gold futures market using an asymmetric Spline-GARCH (ASP-GARCH) model. We then regress monthly low-frequency volatility on selected monthly macroeconomic indicators to study the impact of macroeconomy on gold futures market and to test for excess volatility. Our main result is volatility in China’s Shanghai gold futures market resulting from both macroeconomic fluctuations and investor behaviour. Chinese Consumer Price Index Volatility and US dollar volatility are the two main determinants of low-frequency gold volatility. We also find significant evidence of excess volatility, which can in part be explained in terms of loss-aversive investor behaviour.