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Are gold and silver cointegrated? New evidence from quantile cointegrating regressions

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  • Schweikert, Karsten

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.

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  • Schweikert, Karsten, 2018. "Are gold and silver cointegrated? New evidence from quantile cointegrating regressions," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 44-51.
    • Handle: RePEc:eee:jbfina:v:88:y:2018:i:c:p:44-51
    DOI: 10.1016/j.jbankfin.2017.11.010
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    More about this item

    Keywords

    Gold; Silver; Quantile cointegration; Time-varying; State-dependence;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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