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The shine of precious metals around the global financial crisis

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McCrorie_PreciousMetals_JoEF_AM_updated.pdf (1.171Mb)
Date
09/2016
Author
Figuerola-Ferretti, Isabel
McCrorie, J. Roderick
Funder
Carnegie Trust
Grant ID
31935
Keywords
Commodities
Precious metals
Fundamentals
Economic bubbles
Mildly explosive processes
Generalized sup ADF test
HB Economic Theory
BDC
R2C
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Abstract
We analyze the price behavior of the main precious metals – gold, silver, platinum and palladium – before, during and in the aftermath of the 2007–08 financial crisis. Using the mildly explosive/multiple bubble technology developed by Phillips, Shi and Yu (2015, International Economic Review 56(4), 1043–1133), we find significant, short periods of mildly explosive behavior in the spot and futures prices of all four metals. Fewer periods are detected using exchange-rate adjusted prices, and almost none when deflated prices are used. We assess whether these findings are indicative of bubble behavior. Convenience yield is shown to have little efficacy in this regard, while other fundamental proxy variables and position data offer only very limited evidence against prices having been anything other than fundamentals-driven. Possible exceptions are in gold in the run-up to the highpoint of the financial crisis, and in silver and palladium around the launch of specific financial products. Some froth, however, is reported and discussed for each metal.
Citation
Figuerola-Ferretti , I & McCrorie , J R 2016 , ' The shine of precious metals around the global financial crisis ' , Journal of Empirical Finance , vol. 38 , no. Part B , pp. 717-738 . https://doi.org/10.1016/j.jempfin.2016.02.013
Publication
Journal of Empirical Finance
Status
Peer reviewed
DOI
https://doi.org/10.1016/j.jempfin.2016.02.013
ISSN
0927-5398
Type
Journal article
Rights
© 2016 Published by Elsevier B.V. This work is made available online in accordance with the publisher’s policies. This is the author created, accepted version manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at http://dx.doi.org/10.1016/j.jempfin.2016.02.013
Description
Figuerola-Ferretti thanks the Spanish Ministry of Education and Science for support under grants MICINN ECO2010-19357, ECO2012-36559 and ECO2013-46395, and McCrorie, The Carnegie Trust for the Universities of Scotland under grant no. 31935.
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  • University of St Andrews Research
URI
http://hdl.handle.net/10023/11634

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