Trinity College Dublin

Skip to main content.

Top Level TCD Links

 

Do Bubbles occur in Gold Prices? Evidence from Gold Lease Rates and Markov Swiching Models

Brian M Lucey: (corresponding author): Business School and Institute for International Integration Studies, Trinity College Dublin, Dublin 2, Ireland. Glasgow School for Business, Glasgow Caledonian University, Scotland, UK blucey@tcd.ie

Fergal A. O'Connor: Business School and Institute for International Integration Studies, Trinity College Dublin, Dublin 2, Ireland. Lancashire Business School, University of Central Lancashire, Preston, UK. Fergal.a.oconnor@gmail.com

IIIS Discussion Paper No. 418

We assess whether two classes of bubbles occur in the spot price of gold, rational speculative and periodically bursting bubbles, using gold's' lease rates for the first time in the literature as a measures of its fundamental value. This question is of particular significance as these are the only observable market measures of a yield that can be earned by owning gold. We use tradition unit root and cointegration tests for rational speculative bubbles and Markov Switching Augmented Dickey-Fuller tests for periodically bursting bubbles. Bubbles are found to possibly exist for in ADF and cointegration bubble tests, but under the markov switching model no bubble found to be present.


Last updated 28 August 2014 by IIIS (Email).