Measuring the strangeness of gold and silver rates of return

Murray Frank, Thanasis Stengos

Research output: Contribution to journalArticlepeer-review

93 Scopus citations

Abstract

The predictability of rates of return on gold and silver are examined. Econometric tests do not reject the martingale hypothesis for either asset. This failure to reject is shown to be misleading. Correlation dimension estimates indicate a structure not captured by ARCH. The correlation dimension is between 6 and 7 while the Kolmogorov entropy is about 0.2 for both assets. The evidence is consistent with a nonlinear deterministic data generating process underlying the rates of return. The evidence is certainly not sufficient to rule out the possibility of some degree of randomness being present.

Original languageEnglish (US)
Pages (from-to)553-567
Number of pages15
JournalReview of Economic Studies
Volume56
Issue number4
DOIs
StatePublished - Oct 1989

Bibliographical note

Funding Information:
Acknowledgement. We would like to thank Richard Arnott, William Brock, Roger Farmer, David Fowler, Clive Granger and Jose Scheinkman for valuable discussions. Lars Hansen's criticisms of an earlier draft were extremely helpful. The comments by the referees are appreciated. This research was partly supported by a grant from the Research Excellence Program of the University of Guelph. We are grateful to all of these individuals, but none of them are responsible for any remaining deficiencies in our work.

Copyright:
Copyright 2016 Elsevier B.V., All rights reserved.

Fingerprint

Dive into the research topics of 'Measuring the strangeness of gold and silver rates of return'. Together they form a unique fingerprint.

Cite this