The degree of price resolution: The case of the gold market

Data from the London gold market are utilized to investigate the nature, frequency, and causes of rounding in transactions prices to the nearest 5, 10, 25, 50 or 100 cents. The basic theoretical model is presented and hypotheses formulated. The data consist of the morning and afternoon fixing prices...

Full description

Saved in:
Bibliographic Details
Published in:The journal of futures markets 1985-04, Vol.5 (1), p.29-43
Main Authors: Ball, Clifford A., Torous, Walter N., Tschoegl, Adrian E.
Format: Article
Language:English
Subjects:
Bias
Economic models
Economic theory
Equilibrium
Futures
Gold markets
Hypotheses
Market prices
Prices
Rates of return
Statistical analysis
Stock exchanges
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Data from the London gold market are utilized to investigate the nature, frequency, and causes of rounding in transactions prices to the nearest 5, 10, 25, 50 or 100 cents. The basic theoretical model is presented and hypotheses formulated. The data consist of the morning and afternoon fixing prices in London from January 2, 1975, to April 30, 1981. The results indicate that: 1. All returns are measured with error and therefore all empirical work is subject to subtle ''errors in variables problems.'' 2. The degree of rounding may be used as a new proxy in studies for the amount of information in the market. 3. The rules on rounding should be considered in the design of new financial contracts. 4. The market's organization may influence the precision with which prices are formed. The results have implications for the optimal design of securities.
ISSN:0270-7314
1096-9934
DOI:10.1002/fut.3990050105