Fractionally Cointegrated Vector Autoregression Model: Evaluation of High/Low and Close/Open Spreads for Precious Metals

Samet Gunay

SAGE Open, 2018, vol. 8, issue 4, 2158244018812649

Abstract: Daily high/low and close/open prices are the key parameters of candlestick approach in technical analysis. Besides, the price spreads are also important as they represent an upward or a downward trend. In this study, we investigate the relationship between daily high/low prices and close/open prices for precious metals: gold, copper, palladium, and silver. Empirical analysis has been performed through fractionally cointegrated vector autoregression (FCVAR) model. To observe the relationships, the trends are tested for their characteristics in both states: positive and negative spreads in close/open prices. Results indicated that for a positive trend, high/low spreads have a negative impact on close/open spreads in long run relationship. However, when closing price is less than the opening prices, it is revealed that expanding range in high/low spreads causes a rise in close/open spreads for copper and silver differently from gold price.

Keywords: FCVAR model; candlestick method; technical analysis; precious metals (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:8:y:2018:i:4:p:2158244018812649

DOI: 10.1177/2158244018812649

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