Testing the efficiency of metal's market: new evidence from a generalized spectral test

Abstract

Purpose This paper aims to examine the weak form of efficiency for price series of four precious metals, i.e. gold, silver, platinum and palladium, using a generalized spectral method. Design/methodology/approach The method has the advantage of detecting both linear and non-linear serial dependence in the conditional mean, and it is robust to various forms of conditional heteroscedasticity. The authors use three different rolling windows for the purpose of robustness. Findings The authors report weak form of efficiency across metals series for almost all rolling windows. The optimum efficiency for Gold and Palladium is achieved through 250 days rolling window estimates whereas it is 500 days rolling window for silver. Platinum has similar efficiency levels across rolling windows. The degree of efficiency for metal prices is observed to be varying over time with silver market possessing highest levels of efficiency. The efficiency synchronization also varies across rolling windows and metals. Research limitations/implications The results reveal that metal markets are efficient for most times implying the low predictability and the low likelihood of earning abnormal returns by speculating in these markets. Originality/value The study uses a relatively new statistical technique, the generalized spectral test, to capture linear and non-linear serial dependence. Therefore, the results possess adequate power against departure from market efficiency.

The role of precious metals in extreme market conditions: evidence from stock markets

“…In theory, beta is a coefficient (a single number); however, the beta is not static in the real world. There are several studies which criticize the static beta coefficients in the literature (Blume, 1971;Black et al, 1972;Fama and MacBeth, 1973;Blume, 1975;Levhari and Levy, 1977;Harvey, 1989;Garcia and Ghysels, 1998;Aygoren and Uyar, 2016;Pathak et al, 2020). The common idea of those studies is that there is a hypothesis of a volatile beta.…”