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Fractionally Cointegrated Vector Autoregression Model: Evaluation of High/Low and Close/Open Spreads for Precious Metals

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  • Samet Gunay

Abstract

Daily high/low and close/open prices are the key parameters of candlestick approach in technical analysis. Besides, the price spreads are also important as they represent an upward or a downward trend. In this study, we investigate the relationship between daily high/low prices and close/open prices for precious metals: gold, copper, palladium, and silver. Empirical analysis has been performed through fractionally cointegrated vector autoregression (FCVAR) model. To observe the relationships, the trends are tested for their characteristics in both states: positive and negative spreads in close/open prices. Results indicated that for a positive trend, high/low spreads have a negative impact on close/open spreads in long run relationship. However, when closing price is less than the opening prices, it is revealed that expanding range in high/low spreads causes a rise in close/open spreads for copper and silver differently from gold price.

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  • Samet Gunay, 2018. "Fractionally Cointegrated Vector Autoregression Model: Evaluation of High/Low and Close/Open Spreads for Precious Metals," SAGE Open, , vol. 8(4), pages 21582440188, November.
    • Handle: RePEc:sae:sagope:v:8:y:2018:i:4:p:2158244018812649
    DOI: 10.1177/2158244018812649
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    References listed on IDEAS

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    1. Monge, Manuel & Gil-Alana, Luis Alberiko, 2021. "Spatial crude oil production divergence and crude oil price behaviour in the United States," Energy, Elsevier, vol. 232(C).

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