Series of Dept Research Seminars - "Chinese Gold Market Analysis: Dependence Structure and Cross Market Transactions" (Date: 20 October 2017)

China plays a critical role in world economy for its enormous economic size and remarkable economic growth rate. In recent years, the continuous financial reforms carried out by China are making Chinese financial markets more influential in the world. Many studies focus on Chinese financial system and its development. However, as an important part of the whole financial system, Chinese gold market still gets little attention in the academic circle. China is the world’s largest gold consumer as well as producer. With the recent actions to internationalize the Chinese gold market, this field is beginning to draw the attention of researchers from all over the world.

This research will focus on Chinese gold market and give a complete picture about the dependence structure between Chinese gold market and other related financial markets. Four research questions will be solved. First, what is the dependence between onshore and offshore RMB based gold price? This part will give the basic dependence structure within the scope of RMB. Second, what is the dependence between China’s gold and international gold price? This part will help us understand the development of China’s gold market under the background of world gold market. Third, what is the joint dependence structure when considering multiple factors, like exchange rates and stock indexes? This part will extend the topic to multivariate situations, allowing us to study the relationships in cross-market transactions. Fourth, when considering high frequency data, is there any different dependence structure? Using high frequency data is an important perspective to study the dependence structure, and it is also meaningful for quant trading in gold markets. Since financial time series exhibit strong non-normality and significant fat-tail, the copula models are used in this research to describe the dependence structure. Finally, some potential applications of the detected dependence structure will be introduced and the corresponding investment advice and strategies for investors will be given.