On the lease rate, convenience yield and speculative effects in the gold futures market

By examining data on the gold forward offered rate (GOFO) and lease rates over the period 1996- 2009, we conclude that the convenience yield of gold is better approximated by the lease rate than the interest-adjusted spread of Fama & French (1983). Using the latter quantity, we study the relationship between gold leasing and the level of COMEX discretionary inventory and exhibit that lease rates are negatively related to inventories. We also show that Futures prices have increasingly exceeded forward prices over the period, and this effect increases with the speculative pressure and the maturity of the contracts

Return-volume dynamics in UK futures

It is widely acknowledged in the financial literature that trading in asset markets is mainly induced by the arrival of new information. However, the contemporaneous and dynamic empirical relationships between volume and returns in futures data, with attendant implications for futures market microstructure, remain largely unresolved due to the inconclusive nature of the extant empirical literature. The present paper examines these relationships from the perspective of competing hypotheses in the context of data for three LIFFE futures contracts over a variety of intra-day frequencies. These results indicate not only a positive contemporaneous relationship between volume and absolute returns but also bidirectional causality for most series and frequencies, consistent with the sequential arrival of information hypothesis, but with different speeds of information dissemination across the three markets. Further examination of the contemporaneous and dynamic relationships between volume and actual returns reveals only limited evidence of any statistically significant associations implying market inefficiency, and consistent with an inverse association between informational asymmetry and market efficiency.