Interactions Between The Gold Price And Gold-related Stock Price In China

As two important components of the world financial system, the gold market and the stock market are both crucial for global investors, thus the study of the dynamic relationship between gold price and stock price can shed lights on the degree and features of the mutual influence of them, so as to promote the healthy development of both markets and to provide investors with diversified portfolio strategies.Lots of research has been done on gold price and stock price, mostly focusing on factors impacting gold price, the relationship between gold price and stock market price, volatility of the gold price. However, the interaction between gold price and gold-related stock price as well as the relationship between their volatilities are rarely studied. Given such background, this paper intends to conduct an in-depth study on gold price and gold-related stock price to find out the linkage between them and their volatilities, on the basis of thorough theoretical literature review and a series of empirical tests.In the theoretical part, this paper reviewed the history of both the world gold market and the Chinese gold market, and listed possible factors influencing the demand and supply of gold. Then, the seven gold mining, melting and processing listed companies in China------Shandong Gold Group, Zhongjin Gold, Zijin Mining Group, Hunan Chenzhou Mining Group, Shandong Humon Melting, Chifeng Gold, Gansu Ronghua Industry Group------are briefly introduced, followed by an explanation of the contract for gold spot trading in the Shanghai Futures Exchange. In the empirical part, this paper examined the smooth of gold price and stock price by ADF test and explored the long-term relationship between them through cointegration test and error correction model. Besides, vector auto-regression model has been used to test the influence of lag values to the present values, and granger causality test has been adopted to test the casual relationship between gold price and stock price. Finally, interactions between the volatilities of gold price and stock price has been examined by the BV-GARCH-BEKK model.Through a series of theoretical and empirical analysis, we found that:there is a positive long-term correlation between the first-order differential values of gold price and stock price; the lag value of gold price has certain impact on stock price; gold price granger causes stock price; volatilities of gold price and stock price are affected by each other, revealing the spillover effect, and the impact of stock price volatility on gold price volatility is greater than the impact of gold price volatility on stock price volatility.