Price discovery of one security traded in several markets around the world

Abstract

In this paper, we analyse the price discovery for SPDR Gold Trust, which is traded on five different markets across the world: the USA, Mexico, Hong Kong, Japan, and Singapore. We find that all prices in the five markets are identical until 23 January 2013 when the Hong Kong prices start deviating from the rest of the group. On 1 July 2013 Mexico joins Hong Kong and starts differing from the rest. We hypothesise that until 23 January 2013 price discovery occurs in the USA and the rest of the markets become price takers. We find that even after 23 January 2013 the US gold market of the SPDR Gold Trust ETF still dominates other markets with more than 90% of the price discovery when using the Hasbrouck information share methodology.