Price discovery in strategically-linked markets: the case of the gold-silver spread

Bahram Adrangi, Arjun Chatrath and Rohan Christie David

Applied Financial Economics, 2000, vol. 10, issue 3, 227-234

Abstract: Using 15 minute intraday data, we analyse the price discovery process among the strategically-linked gold and silver futures contracts and examine the role of the intermarket spread in their price dynamics. The multivariate model employed allows for intermarket volatility spillover and asymmetric-spread effects on the variance and covariance of the two contracts. The data suggest that the silver contract bears the majority of the burden of convergence to the gold-silver spread. This evidence is noteworthy since the silver contract was by far the more volatile of the two contracts over the period studied.

Date: 2000
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DOI: 10.1080/096031000331644

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