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Turn-of-the Year Affect in Gold Prices: Decomposition Analysis

Year 2016, Volume: 2 Issue: 3, 1 - 12, 01.09.2016

Osman Gülseven

Abstract

In this article, we examine whether the gold market returns is subject to abnormally positive or negative returns in some months of the calendar year. We derive the percentage monthly returns of gold prices denoted in both major global currencies and the currencies of the largest gold consumer markets. The statistical analysis and the decomposition techniques suggests gold prices show some seasonal behaviour during the turn of the year. Our findings for these months are robust to the chosen currency, albeit with some differences in monthly returns between highly correlated major currencies and loosely correlated gold demanding currencies. We observe a strong cyclical behaviour in gold markets during the turn-of-the-year period. January is likely to offer the highest return whereas significant negative returns are expected in July

Keywords

Gold Investment calendar effect decomposition analysis

References

  • Auer, B.R. Daily seasonality in crude oil returns and volatilities (2014) Energy Economics, 43, pp. 82- 88. DOI: 10.1016/j.eneco.2014.02.005
  • Balaban, E., Bayar, A., Kan, Ö.B. Stock returns, seasonality and asymmetric conditional volatility in world equity markets (2001) Applied Economics Letters, 8 (4), pp. 263-268.
  • Bouman, S. and Jacobsen, B., 2002. The Halloween Indicator, “Sell in May and Go Away”: Another Puzzle. The American Economic Review, 92(5), pp. 1618-1635.
  • Basu, S., Clouse, M.L. A comparative analysis of gold market efficiency using derivative market information (1993) Resources Policy, 19 (3), pp. 217-224. DOI: 10.1016/0301- 4207(93)90007-A
  • Batten, J.A., Ciner, C., Lucey, B.M., Szilagyi, P.G. The structure of gold and silver spread returns (2013) Quantitative Finance, 13 (4), pp. 561-570. DOI: 10.1080/14697688.2012.708777
  • Baur, D.G. The autumn effect of gold (2013) Research in International Business and Finance, 27 (1), pp. 1-11. DOI: 10.1016/j.ribaf.2012.05.001
  • Berument, H., Kiymaz, H. The day of the week effect on stock market volatility (2001) Journal of Economics and Finance, 25 (2), pp. 181-193.
  • Blose, L.E., Gondhalekar, V. Weekend gold returns in bull and bear markets (2013) Accounting and Finance, 53 (3), pp. 609-622. DOI: 10.1111/j.1467-629X.2012.00497.x
  • Cai, J., Cheung, Y.-L., Wong, M.C.S. What moves the gold market? (2001) Journal of Futures Markets, 21 (3), pp. 257-278. DOI: 10.1002/1096-9934(200103)21:33.0.CO;2-W
  • Capie, F., Mills, T.C., Wood, G. Gold as a hedge against the dollar (2005) Journal of International Financial 10.1016/j.intfin.2004.07.002 Institutions and Money, 15 (4), pp. 343-352. DOI
  • Charles, A., Darné, O., Kim, J.H. Will precious metals shine? A market efficiency perspective (2015) International Review of Financial Analysis, DOI: 10.1016/j.irfa.2015.01.018
  • Dzhabarov, C. and Ziemba, W.T., 2010. Do Seasonal Anomalies Still Work? The Journal of Portfolio Management, 36(3), pp. 93-104.
  • El Hedi Arouri, M., Lahiani, A., Nguyen, D.K. World gold prices and stock returns in China: Insights for hedging and diversification strategies (2015) Economic Modelling, 44, pp. 273-282. DOI: 10.1016/j.econmod.2014.10.030
  • Gallais-Hamonno, G., Hoang, T.-H.-V., Oosterlinck, K. Informational efficiency of the clandestine and official gold markets in Paris (2015) Economics Letters, 126, pp. 28-30. DOI: 10.1016/j.econlet.2014.11.013
  • Gencer, G., Musoglu, Z. The safe haven property of gold in Turkish financial markets: An investigation of the global financial crisis (2014) Bogazici Journal, 28 (2), pp. 75-89.
  • Gooijer, J.G. and Hyndman, R.J., 2006. 25 Years of Time Series Forecasting. International Journal of Forecasting, 22(3), pp. 443-473.
  • Gulseven, O. Multidimensional Analysis of Monthly Stock Market Returns, Scientific Annals of the ‟Alexandru Ioan Cuza” University of Iaşi Economic Sciences, 61 (2), 2014, 181-196. DOI 10.2478/aicue-2014-0013
  • Gülseven, O., Ekici, Ö. The Turkish appetite for gold: An Islamic explanation (2016) Resources Policy, 48, pp. 41-49. DOI: 10.1016/j.resourpol.2016.02.006
  • Ho, Y.-K. A test of the incrementally efficient market hypothesis for the London gold market (1985) Economics Letters, 19 (1), pp. 67-70. DOI: 10.1016/0165-1765(85)90105-3
  • Jain, A., Ghosh, S. Dynamics of global oil prices, exchange rate and precious metal prices in India (2013) Resources Policy, 38 (1), pp. 88-93. DOI: 10.1016/j.resourpol.2012.10.001
  • Kaufmann, T.D., Winters, R.A. The price of gold. A simple model (1989) Resources Policy, 15 (4), pp. 309-313.
  • Kiohos, A., Sariannidis, N. Determinants of the asymmetric gold market (2010) Investment Management and Financial Innovations, 7 (4), pp. 26-33.
  • Kiran, B. An analysis of long memory in Turkish gold returns (2010) International Journal of Economic Research, 7 (2), pp. 141-150.
  • Kristoufek, L., Vosvrda, M. Gold, currencies and market efficiency (2016) Physica A: Statistical Mechanics and its Applications, 449, pp. 27-34. DOI: 10.1016/j.physa.2015.12.075
  • Lu, J.-R., Chan, C.-M. Optimal portfolio choice of gold assets in the differential market and differential game structures (2014) Review of Quantitative Finance and Accounting, 42 (2), pp. 309-325. DOI: 10.1007/s11156-013-0343-2
  • Lucey, B.M. Lunar seasonality in precious metal returns? (2010) Applied Economics Letters, 17 (9), pp. 835-838. DOI: 10.1080/17446540802516188
  • Mali, P. Fluctuation of gold price in India versus global consumer price index (2014) Fractals, 22 (1- 2), art. no. 14500042 DOI:10.1142/S0218348X14500042
  • Mehdian, S. and Perry, M.J., 2002. Anomalies in U. S. equity markets: A re-examination of the January effect. Applied Financial Economics, 12(2), pp. 141-145.
  • Mehrara, M., Moeini, A., Ahrari, M., Varahrami, V. Inefficiency in gold market (2010) International Research Journal of Finance and Economics, 43, pp. 57-67.
  • Miyazaki, T., Hamori, S. Testing for causality between the gold return and stock market performance: Evidence for 'gold investment in case of emergency' (2013) Applied Financial Economics, 23 (1), pp. 27-40. DOI:10.1080/09603107.2012.699184
  • Munir, Q., Kok, S.C. Does malaysian gold bullion coin prices follow mean reversion or random walk? (2014) Journal of Applied Economic Sciences, 9 (1), pp. 76-87.
  • Narayan, P.K., Narayan, S., Zheng, X. Gold and oil futures markets: Are markets efficient? (2010) Applied Energy, 87 (10), pp. 3299-3303. DOI: 10.1016/j.apenergy.2010.03.020
  • Ntim, C.G., English, J., Nwachukwu, J., Wang, Y. On the efficiency of the global gold markets (2015) International Review of Financial Analysis, . Article in Press. DOI: 10.1016/j.irfa.2015.03.013
  • Pierdzioch, C., Risse, M., Rohloff, S. On the efficiency of the gold market: Results of a real-time forecasting approach (2014) International Review of Financial Analysis, 32, pp. 95-108. DOI: 10.1016/j.irfa.2014.01.012
  • Pukthuanthong, K., Roll, R. Gold and the Dollar (and the Euro, Pound, and Yen) (2011) Journal of Banking and Finance, 35 (8), pp. 2070-2083. DOI: 10.1016/j.jbankfin.2011.01.014
  • Pullen, T., Benson, K., Faff, R. A comparative analysis of the investment characteristics of alternative gold assets (2014) Abacus, 50 (1), pp. 76-92. DOI: 10.1111/abac.12023
  • Shahbaz, M., Tahir, M.I., Ali, I., Rehman, I.U. Is gold investment a hedge against inflation in Pakistan? A co-integration and causality analysis in the presence of structural breaks (2014) North American Journal of Economics and Finance, 28, pp. 190-205. DOI: 10.1016/j.najef.2014.03.012
  • Sharma, S.S. Can consumer price index predict gold price returns? (2016) Economic Modelling, 55, pp. 269-278. DOI:10.1016/j.econmod.2016.02.014
  • Tschoegl, A.E. Efficiency in the gold market - a note (1980) Journal of Banking and Finance, 4 (4), pp. 371-379. DOI: 10.1016/0378-4266(80)90015-1
  • Xian, L., He, K., Lai, K.K. Gold price analysis based on ensemble empirical model decomposition and independent component analysis (2016) Physica A: Statistical Mechanics and its Applications, 454, pp. 11-23. DOI: 10.1016/j.physa.2016.02.055
  • Zhang, Y.-J., Wei, Y.-M. The crude oil market and the gold market: Evidence for cointegration, causality and price discovery (2010) Resources Policy, 35 (3), pp. 168-177. DOI: 10.1016/j.resourpol.2010.05.003

Turn-of-the Year Affect in Gold Prices: Decomposition Analysis

Year 2016, Volume: 2 Issue: 3, 1 - 12, 01.09.2016

Osman Gülseven

Abstract

References

  • Auer, B.R. Daily seasonality in crude oil returns and volatilities (2014) Energy Economics, 43, pp. 82- 88. DOI: 10.1016/j.eneco.2014.02.005
  • Balaban, E., Bayar, A., Kan, Ö.B. Stock returns, seasonality and asymmetric conditional volatility in world equity markets (2001) Applied Economics Letters, 8 (4), pp. 263-268.
  • Bouman, S. and Jacobsen, B., 2002. The Halloween Indicator, “Sell in May and Go Away”: Another Puzzle. The American Economic Review, 92(5), pp. 1618-1635.
  • Basu, S., Clouse, M.L. A comparative analysis of gold market efficiency using derivative market information (1993) Resources Policy, 19 (3), pp. 217-224. DOI: 10.1016/0301- 4207(93)90007-A
  • Batten, J.A., Ciner, C., Lucey, B.M., Szilagyi, P.G. The structure of gold and silver spread returns (2013) Quantitative Finance, 13 (4), pp. 561-570. DOI: 10.1080/14697688.2012.708777
  • Baur, D.G. The autumn effect of gold (2013) Research in International Business and Finance, 27 (1), pp. 1-11. DOI: 10.1016/j.ribaf.2012.05.001
  • Berument, H., Kiymaz, H. The day of the week effect on stock market volatility (2001) Journal of Economics and Finance, 25 (2), pp. 181-193.
  • Blose, L.E., Gondhalekar, V. Weekend gold returns in bull and bear markets (2013) Accounting and Finance, 53 (3), pp. 609-622. DOI: 10.1111/j.1467-629X.2012.00497.x
  • Cai, J., Cheung, Y.-L., Wong, M.C.S. What moves the gold market? (2001) Journal of Futures Markets, 21 (3), pp. 257-278. DOI: 10.1002/1096-9934(200103)21:33.0.CO;2-W
  • Capie, F., Mills, T.C., Wood, G. Gold as a hedge against the dollar (2005) Journal of International Financial 10.1016/j.intfin.2004.07.002 Institutions and Money, 15 (4), pp. 343-352. DOI
  • Charles, A., Darné, O., Kim, J.H. Will precious metals shine? A market efficiency perspective (2015) International Review of Financial Analysis, DOI: 10.1016/j.irfa.2015.01.018
  • Dzhabarov, C. and Ziemba, W.T., 2010. Do Seasonal Anomalies Still Work? The Journal of Portfolio Management, 36(3), pp. 93-104.
  • El Hedi Arouri, M., Lahiani, A., Nguyen, D.K. World gold prices and stock returns in China: Insights for hedging and diversification strategies (2015) Economic Modelling, 44, pp. 273-282. DOI: 10.1016/j.econmod.2014.10.030
  • Gallais-Hamonno, G., Hoang, T.-H.-V., Oosterlinck, K. Informational efficiency of the clandestine and official gold markets in Paris (2015) Economics Letters, 126, pp. 28-30. DOI: 10.1016/j.econlet.2014.11.013
  • Gencer, G., Musoglu, Z. The safe haven property of gold in Turkish financial markets: An investigation of the global financial crisis (2014) Bogazici Journal, 28 (2), pp. 75-89.
  • Gooijer, J.G. and Hyndman, R.J., 2006. 25 Years of Time Series Forecasting. International Journal of Forecasting, 22(3), pp. 443-473.
  • Gulseven, O. Multidimensional Analysis of Monthly Stock Market Returns, Scientific Annals of the ‟Alexandru Ioan Cuza” University of Iaşi Economic Sciences, 61 (2), 2014, 181-196. DOI 10.2478/aicue-2014-0013
  • Gülseven, O., Ekici, Ö. The Turkish appetite for gold: An Islamic explanation (2016) Resources Policy, 48, pp. 41-49. DOI: 10.1016/j.resourpol.2016.02.006
  • Ho, Y.-K. A test of the incrementally efficient market hypothesis for the London gold market (1985) Economics Letters, 19 (1), pp. 67-70. DOI: 10.1016/0165-1765(85)90105-3
  • Jain, A., Ghosh, S. Dynamics of global oil prices, exchange rate and precious metal prices in India (2013) Resources Policy, 38 (1), pp. 88-93. DOI: 10.1016/j.resourpol.2012.10.001
  • Kaufmann, T.D., Winters, R.A. The price of gold. A simple model (1989) Resources Policy, 15 (4), pp. 309-313.
  • Kiohos, A., Sariannidis, N. Determinants of the asymmetric gold market (2010) Investment Management and Financial Innovations, 7 (4), pp. 26-33.
  • Kiran, B. An analysis of long memory in Turkish gold returns (2010) International Journal of Economic Research, 7 (2), pp. 141-150.
  • Kristoufek, L., Vosvrda, M. Gold, currencies and market efficiency (2016) Physica A: Statistical Mechanics and its Applications, 449, pp. 27-34. DOI: 10.1016/j.physa.2015.12.075
  • Lu, J.-R., Chan, C.-M. Optimal portfolio choice of gold assets in the differential market and differential game structures (2014) Review of Quantitative Finance and Accounting, 42 (2), pp. 309-325. DOI: 10.1007/s11156-013-0343-2
  • Lucey, B.M. Lunar seasonality in precious metal returns? (2010) Applied Economics Letters, 17 (9), pp. 835-838. DOI: 10.1080/17446540802516188
  • Mali, P. Fluctuation of gold price in India versus global consumer price index (2014) Fractals, 22 (1- 2), art. no. 14500042 DOI:10.1142/S0218348X14500042
  • Mehdian, S. and Perry, M.J., 2002. Anomalies in U. S. equity markets: A re-examination of the January effect. Applied Financial Economics, 12(2), pp. 141-145.
  • Mehrara, M., Moeini, A., Ahrari, M., Varahrami, V. Inefficiency in gold market (2010) International Research Journal of Finance and Economics, 43, pp. 57-67.
  • Miyazaki, T., Hamori, S. Testing for causality between the gold return and stock market performance: Evidence for 'gold investment in case of emergency' (2013) Applied Financial Economics, 23 (1), pp. 27-40. DOI:10.1080/09603107.2012.699184
  • Munir, Q., Kok, S.C. Does malaysian gold bullion coin prices follow mean reversion or random walk? (2014) Journal of Applied Economic Sciences, 9 (1), pp. 76-87.
  • Narayan, P.K., Narayan, S., Zheng, X. Gold and oil futures markets: Are markets efficient? (2010) Applied Energy, 87 (10), pp. 3299-3303. DOI: 10.1016/j.apenergy.2010.03.020
  • Ntim, C.G., English, J., Nwachukwu, J., Wang, Y. On the efficiency of the global gold markets (2015) International Review of Financial Analysis, . Article in Press. DOI: 10.1016/j.irfa.2015.03.013
  • Pierdzioch, C., Risse, M., Rohloff, S. On the efficiency of the gold market: Results of a real-time forecasting approach (2014) International Review of Financial Analysis, 32, pp. 95-108. DOI: 10.1016/j.irfa.2014.01.012
  • Pukthuanthong, K., Roll, R. Gold and the Dollar (and the Euro, Pound, and Yen) (2011) Journal of Banking and Finance, 35 (8), pp. 2070-2083. DOI: 10.1016/j.jbankfin.2011.01.014
  • Pullen, T., Benson, K., Faff, R. A comparative analysis of the investment characteristics of alternative gold assets (2014) Abacus, 50 (1), pp. 76-92. DOI: 10.1111/abac.12023
  • Shahbaz, M., Tahir, M.I., Ali, I., Rehman, I.U. Is gold investment a hedge against inflation in Pakistan? A co-integration and causality analysis in the presence of structural breaks (2014) North American Journal of Economics and Finance, 28, pp. 190-205. DOI: 10.1016/j.najef.2014.03.012
  • Sharma, S.S. Can consumer price index predict gold price returns? (2016) Economic Modelling, 55, pp. 269-278. DOI:10.1016/j.econmod.2016.02.014
  • Tschoegl, A.E. Efficiency in the gold market - a note (1980) Journal of Banking and Finance, 4 (4), pp. 371-379. DOI: 10.1016/0378-4266(80)90015-1
  • Xian, L., He, K., Lai, K.K. Gold price analysis based on ensemble empirical model decomposition and independent component analysis (2016) Physica A: Statistical Mechanics and its Applications, 454, pp. 11-23. DOI: 10.1016/j.physa.2016.02.055
  • Zhang, Y.-J., Wei, Y.-M. The crude oil market and the gold market: Evidence for cointegration, causality and price discovery (2010) Resources Policy, 35 (3), pp. 168-177. DOI: 10.1016/j.resourpol.2010.05.003
There are 41 citations in total.

Details

Primary Language English
Journal Section Research Article
Authors

Osman Gülseven This is me

Publication Date September 1, 2016
Published in Issue Year 2016 Volume: 2 Issue: 3

Cite

APA Gülseven, O. (2016). Turn-of-the Year Affect in Gold Prices: Decomposition Analysis. Uluslararası Ekonomik Araştırmalar Dergisi, 2(3), 1-12.
AMA Gülseven O. Turn-of-the Year Affect in Gold Prices: Decomposition Analysis. UEAD. September 2016;2(3):1-12.
Chicago Gülseven, Osman. “Turn-of-the Year Affect in Gold Prices: Decomposition Analysis”. Uluslararası Ekonomik Araştırmalar Dergisi 2, no. 3 (September 2016): 1-12.
EndNote Gülseven O (September 1, 2016) Turn-of-the Year Affect in Gold Prices: Decomposition Analysis. Uluslararası Ekonomik Araştırmalar Dergisi 2 3 1–12.
IEEE O. Gülseven, “Turn-of-the Year Affect in Gold Prices: Decomposition Analysis”, UEAD, vol. 2, no. 3, pp. 1–12, 2016.
ISNAD Gülseven, Osman. “Turn-of-the Year Affect in Gold Prices: Decomposition Analysis”. Uluslararası Ekonomik Araştırmalar Dergisi 2/3 (September 2016), 1-12.
JAMA Gülseven O. Turn-of-the Year Affect in Gold Prices: Decomposition Analysis. UEAD. 2016;2:1–12.
MLA Gülseven, Osman. “Turn-of-the Year Affect in Gold Prices: Decomposition Analysis”. Uluslararası Ekonomik Araştırmalar Dergisi, vol. 2, no. 3, 2016, pp. 1-12.
Vancouver Gülseven O. Turn-of-the Year Affect in Gold Prices: Decomposition Analysis. UEAD. 2016;2(3):1-12.