A comparative analysis of gold market efficiency using derivative market information. 1993
This 1993 paper tests whether the put – call gold options ratio can be used to predict the gold price over a year. It finds that there is some statistical power but it does not attempt to give e firm answer on whether the market can be viewed as efficient as a result. In addition the sample length is very short. Further study of this issue would be very interesting.
Data: NYMEX Gold futures prices, Dow Jones Bond Index, Put-Call ration for the Yew York Options market – 1/10/89 – 30/9/90
Citation: Basu, Somnath, and Maclyn L. Clouse. “A comparative analysis of gold market efficiency using derivative market information.” Resources Policy 19.3 (1993): 217-224.
Abstract: The concept of market efficiency is the foundation for several theoretical constructs in financial economics. This paper tests for market efficiency when information from one market is used to predict prices in a different market. We examine both time-series and multiple regression models and compare the power of each of these models from both a statistical and economic viewpoint. Significant correlations between the gold spot market price and other market variables suggest that market inefficiencies exist. For our particular sample and tests, the time-series model is much superior to the multiple regression model. However, the results also suggest that a transfer function model which is a weighted average of the two models could be an effective forecasting model.