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Gold and Silver Manipulation: What Can Be Empirically Verified?

25 Pages Posted: 25 Jan 2016  

Jonathan A. Batten

Monash University

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Ljubljana - Faculty of Economics

Maurice Peat

The University of Sydney; Financial Research Network (FIRN)

Date Written: January 24, 2016

Abstract

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.

Keywords: Manipulation, Gold, silver, price suppression

JEL Classification: N50, Q31, G38, G12

Suggested Citation

Batten, Jonathan A. and Lucey, Brian M. and Peat, Maurice, Gold and Silver Manipulation: What Can Be Empirically Verified? (January 24, 2016). Available at SSRN: https://ssrn.com/abstract=2721250 or http://dx.doi.org/10.2139/ssrn.2721250

Jonathan A. Batten

Monash University ( email )

Melbourne
Australia

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Maurice Peat

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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