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Fixing a Leaky Fixing: Short‐Term Market Reactions to the London PM Gold Price Fixing
Author(s) -
Caminschi Andrew,
Heaney Richard
Publication year - 2014
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21636
Subject(s) - price fixing , futures contract , volatility (finance) , economics , futures market , monetary economics , gold standard (test) , financial economics , price discovery , market economy , mathematics , statistics , monopoly
This article investigates the impact of the London PM gold price fixing on two exchange‐traded gold instruments: the GC gold futures contract and the GLD exchange‐traded fund. We find significantly elevated levels of trade volume and price volatility immediately following the fixing's start, well before the conclusion of the fixing and the publication of its results. Similarly, we find statistically significant return advantages in the 4 minutes following the start of the fixing for informed traders. We find no significant impacts or returns following the publication of the fixing results. Trades in the opening minutes of the fixing are significantly predictive of the price direction of the fixings, in some cases exceeding 90%. Combined, these findings support the following conclusions: that the London PM gold price fixing does have material impact on the exchange traded gold instruments, information from the fixing is leaking into markets prior the fixing results being published, and there exist economic returns for trading on these information leaks. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 34:1003–1039, 2014