Gold and Oil Prices: Abnormal Returns, Momentum and Contrarian Effects

40 Pages Posted: 28 Jul 2020

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Alex Plastun

Sumy State University

Date Written: 2020

Abstract

This paper explores price (momentum and contrarian) effects on the days characterised by abnormal returns and the following ones in two commodity markets. Specifically, using daily Gold and Oil price data over the period 01.01.2009-31.03.2020 the following hypotheses are tested: H1) there are price effects on days with abnormal returns, H2) there are price effects on the day after abnormal returns occur; H3) the price effects caused by abnormal returns are exploitable. For these purposes average analysis, t-tests, CAR and trading simulation approaches are used. The main results can be summarised as follows. Hourly returns during the day of abnormal returns are significantly bigger than those during average "normal" days. Prices tend to move in the direction of abnormal returns till the end of the day when these occur. The presence of abnormal returns can usually be detected before the end of the day by estimating specific timing parameters, and a momentum effect can be detected. On the following day two different price patterns are detected: a momentum effect for Oil prices and a contrarian effect for Gold prices respectively. Trading simulations show that these effects can be exploited to generate abnormal profits.

Keywords: commodities, anomalies, momentum effect, contrarian effect, abnormal returns

JEL Classification: G120, G170, C630

Suggested Citation

Caporale, Guglielmo Maria and Plastun, Alex, Gold and Oil Prices: Abnormal Returns, Momentum and Contrarian Effects (2020). CESifo Working Paper No. 8445, Available at SSRN: https://ssrn.com/abstract=3662052

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

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HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Alex Plastun

Sumy State University ( email )

Rymskyi-Korsakov str., 2
Sumy, 40000
Ukraine

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