Market Backwardation and The Theory of Storage: An Empirical Investigation of Indian Gold Futures Markets

The backwardation and contango in the futures markets are explained by two popular theories, namely the theory of storage and the theory of risk premium. The investment assets tend to follow the theory of risk premium, whereas the consumption assets are likely to follow the theory of storage. As India is the largest importer of gold, and gold is used for consumption purposes (mostly by jewellers, who store gold as a consumption commodity), we empirically test whether backwardation in the gold market is explained by the theory of storage. We use the indirect test of the theory of storage developed by Fama and French (1988 , Journal of Finance, Vol. 4, p. 1075), calculate the interest adjusted basis (IAB) and test the implications of the theory of storage. We also use two asymmetric models of the Generalized Autoregressive Conditional Heteroscedastic (GARCH) family to understand the asymmetric volatility of IAB. We find that the Indian gold futures markets partially follow the theory of storage; however, we do not find any support of asymmetric behaviour of IAB in the contango and backwardation markets. Our results suggest that in the context of the Indian gold market, keeping inventory has minimal benefits, and gold behaves more like an investment asset.

Investigating seasonality, policy intervention and forecasting in the Indian gold futures market: a comparison based on modeling non-constant variance using two different methods

This study focuses on the Indian gold futures market where primary participants hold sentimental value for the underlying asset and are globally ranked number two in terms of the largest private holdings in the physical form. The trade of gold futures relates to seasons, festivity, and government policy. So, the paper will discuss seasonality and intervention in the analysis. Due to non-constant variance, we will also use the standard variance stabilization transformation method and the ARIMA/GARCH modelling method to compare the forecast performance on the gold futures prices. The results from the analysis show that while the standard variance transformation method may provide better point forecast values, the ARIMA/GARCH modelling method provides much shorter forecast intervals. The empirical results of this study which rationalise the effect of seasonality in the Indian bullion derivative market have not been reported in literature.

Has COVID-19 Changed the Hedge Effectiveness of Bitcoin?

The Bitcoin market has become a research hotspot after the outbreak of Covid-19. In this paper, we focus on the relationships between the Bitcoin spot and futures. Specifically, we adopt the vector autoregression-dynamic correlation coefficient-generalized autoregressive conditional heteroskedasticity (VAR-DCC-GARCH) model and vector autoregression-Baba, Engle, Kraft, and Kroner-generalized autoregressive conditional heteroskedasticity (VAR-BEKK-GARCH) models and calculate the hedging effectiveness (HE) value to investigate the dynamic correlation and volatility spillover and assess the risk reduction of the Bitcoin futures to spot. The empirical results show that the Bitcoin spot and futures markets are highly connected; second, there exists a bi-directional volatility spillover between the spot and futures market; third, the HE value is equal to 0.6446, which indicates that Bitcoin futures can indeed hedge the risks in the Bitcoin spot market. Furthermore, we update the data to the post-Covid-19 period to do the robustness checks. The results do not change our conclusion that Bitcoin futures can hedge the risks in the Bitcoin spot market, and besides, the post-Covid-19 results indicate that the hedging ability of Bitcoin futures increased. Finally, we test whether the gold futures can be used as a Bitcoin spot market hedge, and we further control other cryptocurrencies to illustrate the hedging ability of the Bitcoin futures to the Bitcoin spot. Overall, the empirical results in this paper will surely benefit the related investors in the Bitcoin market.

THE SAPURAL INVESTMENT: DISTINCTIVE FEATURES, ADVANTAGES AND DISADVANTAGES

Currently, alternative investment paths are being sought, one of which is hoarding, ie investing in gold, gold bars, jewelry, investment and collector coins, metal accounts, gold futures and options, world fund stocks, precious stones, works art, antiques. It is emphasized that in modern Ukraine there are insufficiently developed institutes of professional experts and appraisers, and there is a complete lack of specialized funds that would manage client funds and invest these funds in such assets. The study showed that against the background of the crisis of financial markets there was a significant increase in demand for works of art, and practical experience shows that almost any security can become a wrapper, and "eternal" values ​​– works of art and real estate are self-sufficient and virtually non-existent, or rather, almost always added to the capitalization. It should be noted that the individual perspectives of this type of financial investment, namely, different from other types of hoarding features inherent only in the studied investment, as well as the advantages and disadvantages of each type of investment are insufficiently presented. The hoarding investment market is considered promising both in the form of asset diversification and as an independent economic category. Peculiarities and distinctive features of hoarding investment from real estate investment and financial market instruments are revealed. Based on the study of the literature, the negative and positive features, features and consequences of different types of hoardings available to individuals and legal entities are studied. Through comparison, similar features and differences of hoarding processes are clarified. Summarizing and understanding the results of the study will allow the investor to make unbiased decisions regarding the implementation of investments that he likes best, focusing on their desires, requests, opportunities and prospects for implementation.