Article ID Journal Published Year Pages File Type
7356610 Journal of Banking & Finance 2018 33 Pages PDF
Abstract
This paper revisits the study on the long-run relationship between gold and silver by Escribano and Granger (1998). We apply a quantile cointegration model to gold and silver prices and to prices of the corresponding futures contracts. Whereas cointegration models, assuming a constant cointegrating vector, fail to detect a cointegration relationship between gold and silver, we are able to show that a nonlinear long-run relationship exits. The cointegrating vector is modelled as state-dependent and time-varying in our framework and the quantile cointegration estimates reveal substantial asymmetry in the relationship. The results suggest that the pronounced role of precious metals as investment opportunities particularly in bubble-like episodes and times of financial turmoil leads to comovement of gold and silver in these periods.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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