Stylized Facts of Intraday Precious Metal Returns

29 Pages Posted: 2 Feb 2016  

Jonathan A. Batten

Monash University

Brian M. Lucey

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

Frank McGroarty

University of Southampton - School of Management

Maurice Peat

The University of Sydney; Financial Research Network (FIRN)

Andrew Urquhart

Southampton Business School

Date Written: February 2, 2016

Abstract

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.

Keywords: Precious metals; High-frequency; Intraday periodicity; Correlation; Gold; Silver; Platinum; Palladium

JEL Classification: G02; G12

Suggested Citation

Batten, Jonathan A. and Lucey, Brian M. and McGroarty, Frank and Peat, Maurice and Urquhart, Andrew, Stylized Facts of Intraday Precious Metal Returns (February 2, 2016). Available at SSRN: https://ssrn.com/abstract=2726505 or http://dx.doi.org/10.2139/ssrn.2726505

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

Frank McGroarty

University of Southampton - School of Management ( email )

Highfield
Southampton S017 1BJ, Hampshire SO17 1BJ
United Kingdom

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

Andrew Urquhart

Southampton Business School ( email )

Highfield
Southampton, Hampshire SO17 1BJ
United Kingdom

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