Testing the Weak Form of Efficient Market Hypothesis in Period of the Global Pandemic of 2020 and the Russian Invasion in 2022: Empirical Evidence from XAU, XAG and XPT
Testing the Weak Form of Efficient Market Hypothesis in Period of the Global Pandemic of 2020 and the Russian Invasion in 2022: Empirical Evidence from XAU, XAG and XPT

Author(s): Nicole Horta, Rui Dias, Paula Heliodoro, Paulo Alexandre, Mariana Chambino
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Events 2020 and 2022 Persistence; Arbitrage; Portfolio diversification
Summary/Abstract: This study intends to determine if the events of 2020 and 2022 have had an impact on the efficiency of the commodities markets, in particular the spot prices of gold (XAU), silver (XAG), and platinum (XPT), between September 18th, 2017, and September 15th, 2022. The findings of the Rankings and Signals test demonstrate that, during the calm time, the gold, silver, and platinum markets do not reject the random walk hypothesis, which means that spot prices are independent and identically distributed (i.i.d.), consequently their movements are assumed to be random. Contrarily, the random walk hypothesis is rejected during the Stress period in all commodity markets, with variance ratios below unity, suggesting that returns show significant autocorrelation. To support this, the findings of the exponent Detrended Fluctuation Analysis (DFA) reveal that silver (XAG) had an antipersistent short memory (α < 0,5), during the Calm period, transitioning to a persistent movement (α > 0,5) during the time of the crisis. While the worldwide financial markets were stable, platinum (XPT) was in a state of equilibrium. This state changed to persistent with the succession of events starting in 2020 (α >0,5). In turn, gold (XAU) reduced its antipersistence (α <0,5) throughout the period of stress in international markets. In conclusion, there is evidence of some dependency in the time series, but this dependence does not appear to be easily exploitable by investors. These findings have significant implications for gold, silver, and platinum’s roles as investment assets.

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