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Market openness and market quality in gold markets

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  • Caihong Xu
  • Dong Zhang

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.

Suggested Citation

  • Caihong Xu & Dong Zhang, 2019. "Market openness and market quality in gold markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(3), pages 384-401, March.
    • Handle: RePEc:wly:jfutmk:v:39:y:2019:i:3:p:384-401
    DOI: 10.1002/fut.21969
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