Stylized Facts of Intraday Precious Metal Returns
Jonathan A. Batten
Brian M. Lucey
Trinity Business School, Trinity College Dublin; University of Ljubljana - Faculty of Economics
University of Southampton - School of Management
University of Sydney; Financial Research Network (FIRN)
Southampton Business School
February 2, 2016
Given the increased attention of precious metals by investors and the finance literature as well as the growth of high frequency trading, the behaviour of intraday precious metal markets is of great interest and importance. Therefore, this paper examines the stylized facts, correlation and interaction between volatility and returns at the 5-minute frequency of gold, silver, platinum and palladium from May 2000 to April 2015. We study the full sample period, as well as three sub-samples to determine how high-frequency data of precious metals have developed over time. We find that over the full sample period that the number of trades has increased substantially over time for each precious metal while the bid-ask spread has narrowed over time, indicating an increase in liquidity and efficiency. We also find strong evidence of periodicity in returns, volatility, volume and bid-ask spread. Returns and volume both experience strong intraday periodicity linked to the opening and closing of major markets around the world while the BAS is at its lowest when European markets are open. We also show a bilateral Granger causality between returns and volatility of each precious metal, which holds for the vast majority subsamples.
Number of Pages in PDF File: 29
Keywords: Precious metals; High-frequency; Intraday periodicity; Correlation; Gold; Silver; Platinum; Palladium
JEL Classification: G02; G12
Date posted: February 2, 2016
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollobot1 in 0.234 seconds