Submitted by Mark O’Byrne – GoldCore
Some interesting research looking at intraday precious metal returns has just been published by Brian Lucey, Jonathan Batten, Maurice Peat, Frank McGroarty and Andrew Urquhart in a paper entitled “Stylized Facts Of Intraday Precious Metal Returns”.
The authors note in the paper that has just been published on the Social Science Research Network (SSRN) website, that
“Precious metals are some of the most traded assets worldwide and they also play an important role for investor as well as comprising an important asset for central banks. Given the increased attention precious metals have received in the literature, the intraday dynamics are of great interest.”
They conclude that
“Initially, we show that the volume of trades of precious metals has increased substantially over the last 15 years’ while the bid-ask spread has decreased indicating the increase in efficiency and liquidity of precious metal markets. We also show strong evidence of intraday periodicity of precious metals volume of trades and volatility.
The intraday volume has increased over time, while the intraday bid-ask spread has decreased over time.
We also study interaction between volatility and returns of each precious metal and our correlation analysis shows that returns are negatively correlated with the contemporaneous volatility and the previous 5-minute volatility.
Furthermore, we find bi-directional Granger causality between volatility and returns suggesting that past volatility (returns) offers significant explanatory power in explaining current returns (volatility).”
The paper can be found here