Conditional Dependence in Precious Metal Prices |
| |
Authors: | Vedat Akgiray G. Geoffrey Booth John J. Hatem Chowdhury Mustafa |
| |
Affiliation: | Clarkson University, Potsdam, NY 13676.;Louisiana State University, Baton Rouge, LA 70803.;Georgia Southern University, Statesboro, GA 30460–8151. The authors thank an anonymous reviewer for his helpful comments. |
| |
Abstract: | This study investigates the time-series properties of gold and silver spot prices. Both precious metal price series are found to exhibit time dependence and pronounced generalized autoregressive conditional heteroscedastic (GARCH) effects. Splitting the data into similar economic subperiods provides superior explanation of these effects because of the observed long-run nonconstancy of the unconditional variance. Further, the power exponential distribution, as opposed to the Student-t, is found to portray accurately the thick-tailed conditional variance that remains after the GARCH effects are removed. These findings imply that constant variance pricing models are inappropriate for securities that are based on precious metal prices. |
| |
Keywords: | |
|
|