Gold and Silver Manipulation: What Can Be Empirically Verified?
Jonathan A. Batten
Brian M. Lucey
Trinity Business School, Trinity College Dublin; University of Ljubljana - Faculty of Economics
University of Sydney; Financial Research Network (FIRN)
January 24, 2016
The issue of gold and silver price manipulation, in particular price suppression, is examined. We use a mixture of normal approach to decompose the returns into abnormal and control samples. Price suppression is a form of market manipulation of the runs type where longer negative runs with lower returns than expected would be observed. To explore whether this form of manipulation can be empirically detected the length of runs and the total return observed during a run were computed for modelled abnormal and control clusters in gold and silver. In both metals the proportion of negative runs in the abnormal cluster is greater than the proportion of negative runs in the control cluster. In both cases the average return for negative runs is significantly lower in the abnormal cluster than in the control cluster. When average returns over positive runs are compared the abnormal group has significantly higher expected returns than the control group.
Given the short maximum run lengths in the abnormal cluster and the fact that positive runs have significantly higher average returns in the abnormal cluster than in the control cluster, it is likely that that the high volatility associated with the abnormal cluster is the driver of the results presented in this study, as opposed to manipulation.
Number of Pages in PDF File: 25
Keywords: Manipulation, Gold, silver, price suppression
JEL Classification: N50, Q31, G38, G12
Date posted: January 25, 2016
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollobot1 in 0.203 seconds