IDEAS home Printed from https://ideas.repec.org/a/fru/finjrn/210106p93-106.html
   My bibliography  Save this article

Unallocated Metal Accounts in Russia: Determinants of Quoted Bid-Ask Spreads

Author

Listed:
  • Elena V. Rozhentsova

    (HSE University, Perm 614000, Russian Federation)

  • Anastasiia D. Saltykova

    (HSE University, Perm 614000, Russian Federation)

  • Tatyana М. Devyatkova

    (JSC “UEC-Aviadvigatel”, Perm 614000, Russian Federation)

Abstract

Due to economic instability there has been an increase in demand for unallocated metal accounts offered by Russian commercial banks since April 2020. Although opening unallocated metal accounts gives banks an opportunity to expand the range of their products, diversify income, attract new clients and retain old ones, most Russian banks do not provide such services. For those, it is important to understand the determinants of bid-ask spreads (the difference between the quoted metal bid and ask prices), since the demand for unallocated metal accounts and the bank’s income from this service depend on the bid-ask spread. The purpose of this paper is to investigate the main determinants of quoted bid-ask spreads on unallocated metal accounts in commercial banks. Multiple regression models are applied for the period from October 2017 to May 2020. There are very few articles on the determinants of quoted bid-ask spreads on unallocated metal accounts; for this reason the paper is based on the results of studies of bid-ask spreads in other markets. Based on recent theoretical results, which indicate that bid-ask spreads depend on price volatility, we confirm this hypothesis on unallocated metal accounts. Moreover, we reveal that banks’ assets and the share of state participation influence bid-ask spreads on unallocated metal accounts in commercial banks. It is also proven that bid-ask spreads for unallocated metal accounts in gold are, on average, lower than those for palladium, platinum and silver.

Suggested Citation

  • Elena V. Rozhentsova & Anastasiia D. Saltykova & Tatyana М. Devyatkova, 2021. "Unallocated Metal Accounts in Russia: Determinants of Quoted Bid-Ask Spreads," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 1, pages 93-106, February.
    • Handle: RePEc:fru:finjrn:210106:p:93-106
    DOI: 10.31107/2075-1990-2021-1-93-106
    as

    Download full text from publisher

    File URL: https://www.finjournal-nifi.ru/images/FILES/Journal/Archive/2021/1/statii/06_1_2021_v13.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.31107/2075-1990-2021-1-93-106?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Narayan, Paresh Kumar & Narayan, Seema & Zheng, Xinwei, 2010. "Gold and oil futures markets: Are markets efficient?," Applied Energy, Elsevier, vol. 87(10), pages 3299-3303, October.
    2. Meslier, Céline & Tacneng, Ruth & Tarazi, Amine, 2014. "Is bank income diversification beneficial? Evidence from an emerging economy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 97-126.
    3. Liang Ding, 2009. "Bid-ask spread and order size in the foreign exchange market: an empirical investigation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 98-105.
    4. Nguyen, My & Skully, Michael & Perera, Shrimal, 2012. "Bank market power and revenue diversification: Evidence from selected ASEAN countries," Journal of Asian Economics, Elsevier, vol. 23(6), pages 688-700.
    5. Beckmann, Joscha & Czudaj, Robert, 2013. "Gold as an inflation hedge in a time-varying coefficient framework," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 208-222.
    6. Liu, Qingfu & Hua, Renhai & An, Yunbi, 2016. "Determinants and information content of intraday bid-ask spreads: Evidence from Chinese commodity futures markets," Pacific-Basin Finance Journal, Elsevier, vol. 38(C), pages 135-148.
    7. Li, Li & Zhang, Yu, 2013. "Are there diversification benefits of increasing noninterest income in the Chinese banking industry?," Journal of Empirical Finance, Elsevier, vol. 24(C), pages 151-165.
    8. Harris, Terry, 2017. "Earnings announcements and quoted bid-ask spreads of U.S. Bank Holding Companies," Finance Research Letters, Elsevier, vol. 20(C), pages 223-228.
    9. Cohen, Kalman J & Maier, Steven F & Schwartz, Robert A & Whitcomb, David K, 1981. "Transaction Costs, Order Placement Strategy, and Existence of the Bid-Ask Spread," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 287-305, April.
    10. Bampinas, Georgios & Panagiotidis, Theodore, 2015. "Are gold and silver a hedge against inflation? A two century perspective," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 267-276.
    11. Glassman, Debra, 1987. "Exchange rate risk and transactions costs: Evidence from bid-ask spreads," Journal of International Money and Finance, Elsevier, vol. 6(4), pages 479-490, December.
    12. Ole Emmrich & Francis Joseph McGroarty, 2013. "Should gold be included in institutional investment portfolios?," Applied Financial Economics, Taylor & Francis Journals, vol. 23(19), pages 1553-1565, October.
    13. Bollerslev, Tim & Melvin, Michael, 1994. "Bid--ask spreads and volatility in the foreign exchange market : An empirical analysis," Journal of International Economics, Elsevier, vol. 36(3-4), pages 355-372, May.
    14. O'Connor, Fergal A. & Lucey, Brian M. & Batten, Jonathan A. & Baur, Dirk G., 2015. "The financial economics of gold — A survey," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 186-205.
    15. Ho, Thomas & Stoll, Hans R., 1981. "Optimal dealer pricing under transactions and return uncertainty," Journal of Financial Economics, Elsevier, vol. 9(1), pages 47-73, March.
    16. Melvin, Michael & Tan, Kok-Hui, 1996. "Foreign Exchange Market Bid-Ask Spreads and the Market Price of Social Unrest," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 329-341, April.
    17. Nguyen, My & Skully, Michael & Perera, Shrimal, 2012. "Market power, revenue diversification and bank stability: Evidence from selected South Asian countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 897-912.
    18. Koutmos, Gregory & Martin, Anna D., 2011. "Currency bid-ask spread dynamics and the Asian crisis: Evidence across currency regimes," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 62-73, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.
    2. King, Michael R. & Osler, Carol L. & Rime, Dagfinn, 2013. "The market microstructure approach to foreign exchange: Looking back and looking forward," Journal of International Money and Finance, Elsevier, vol. 38(C), pages 95-119.
    3. Shubhasis Dey, 2016. "Historical Events and the Gold Price," Working papers 198, Indian Institute of Management Kozhikode.
    4. O'Connor, Fergal A. & Lucey, Brian M. & Batten, Jonathan A. & Baur, Dirk G., 2015. "The financial economics of gold — A survey," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 186-205.
    5. Gulati, Rachita & Singh, Nirmal & Kumar, Sunil & Duppati, Geeta, 2023. "Bank stability in the Indian subcontinent region: Evolution and determinants," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    6. Shoaib Nisar & Ke Peng & Susheng Wang & Badar Nadeem Ashraf, 2018. "The Impact of Revenue Diversification on Bank Profitability and Stability: Empirical Evidence from South Asian Countries," IJFS, MDPI, vol. 6(2), pages 1-25, April.
    7. Dey Shubhasis & Sampath Aravind, 2017. "Dynamic Linkages between Gold and Equity Prices: Evidence from Indian Financial Services and Information Technology Companies," Working papers 251, Indian Institute of Management Kozhikode.
    8. Bilgin, Mehmet Huseyin & Gogolin, Fabian & Lau, Marco Chi Keung & Vigne, Samuel A., 2018. "Time-variation in the relationship between white precious metals and inflation: A cross-country analysis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 55-70.
    9. Haykel Zouaoui & Faten Zoghlami, 2023. "What do we know about the impact of income diversification on bank performance? A systematic literature review," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(3), pages 286-309, September.
    10. Vasilios Plakandaras & Periklis Gogas & Theophilos Papadimitriou, 2021. "Gold Against the Machine," Computational Economics, Springer;Society for Computational Economics, vol. 57(1), pages 5-28, January.
    11. Ali Kutan & Su Zhou, 1995. "Sociopolitical instability, volatility, and the bid-ask spread: Evidence from the free market for dollars in Poland," Open Economies Review, Springer, vol. 6(3), pages 225-236, July.
    12. Zouaoui, Haykel & Zoghlami, Feten, 2020. "On the income diversification and bank market power nexus in the MENA countries: Evidence from a GMM panel-VAR approach," Research in International Business and Finance, Elsevier, vol. 52(C).
    13. Kumar, Satish, 2017. "On the nonlinear relation between crude oil and gold," Resources Policy, Elsevier, vol. 51(C), pages 219-224.
    14. Toh, Moau Yong, 2019. "Effects of bank capital on liquidity creation and business diversification: Evidence from Malaysia," Journal of Asian Economics, Elsevier, vol. 61(C), pages 1-19.
    15. Thuy Thu Nguyen & Hai Hong Ho & Duy Van Nguyen & Anh Cam Pham & Trang Thu Nguyen, 2021. "The Effects of Business Model on Bank’s Stability," IJFS, MDPI, vol. 9(3), pages 1-12, August.
    16. Karkowska Renata, 2019. "Model of Risk Diversification in the Banking Sector," Folia Oeconomica Stetinensia, Sciendo, vol. 19(1), pages 31-42, June.
    17. Thi Hong Van Hoang & Amine Lahiani & David Heller, 2016. "Is gold a hedge against inflation? New evidence from a nonlinear ARDL approach," Post-Print hal-02012307, HAL.
    18. Shabir, Mohsin & Jiang, Ping & Hashmi, Shujahat Haider & Bakhsh, Satar, 2022. "Non-linear nexus between economic policy uncertainty and bank lending," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 657-679.
    19. Abuzayed, Bana & Al-Fayoumi, Nedal & Molyneux, Phil, 2018. "Diversification and bank stability in the GCC," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 57(C), pages 17-43.
    20. Hoang, Thi Hong Van & Lahiani, Amine & Heller, David, 2016. "Is gold a hedge against inflation? New evidence from a nonlinear ARDL approach," Economic Modelling, Elsevier, vol. 54(C), pages 54-66.

    More about this item

    Keywords

    unallocated metal account; bid-ask spread; price volatility; banking sector; gold market; precious metals market;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fru:finjrn:210106:p:93-106. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gennady Ageev (email available below). General contact details of provider: https://edirc.repec.org/data/frigvru.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.