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The structure of gold and silver spread returns

Jonathan Batten (), Cetin Ciner, Brian Lucey () and Peter Szilagyi ()

Quantitative Finance, 2013, vol. 13, issue 4, 561-570

Abstract: The price dynamics of gold and silver have long been a matter of popular concern and fascination. The objective of this study is to investigate the dynamics of the bivariate relationship between gold and silver prices. First, we investigate the spread, measured as the price difference between gold and silver trading as a futures contract. Then the presence of a fractal structure is measured using statistical techniques based on rescaled range analysis after accommodating short-term autocorrelated innovations in the return process. To highlight the economic consequences of fractality, we apply trading rules based upon the Hurst coefficient to the time series data. Importantly, we find that these rules out-perform simple buy-hold and moving-average strategies over varying holding periods.

Date: 2013
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Handle: RePEc:taf:quantf:v:13:y:2013:i:4:p:561-570