The informational content of unconventional monetary policy on precious metal markets

Papadamou, S. and Sogiakas, V. (2018) The informational content of unconventional monetary policy on precious metal markets. Journal of Forecasting, 37(1), pp. 16-36. (doi: 10.1002/for.2461)

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Abstract

This paper investigates the informational content of unconventional monetary policies and its effect on commodity markets, adopting a nonlinear approach for modeling volatility. The main question addressed is how the Bank of England, Bank of Japan, and European Central Bank's (ECB's) announcements concerning monetary easing affect two major commodities: gold and silver. Our empirical evidence based on daily and high-frequency data suggests that relevant information causes ambiguous valuation adjustments as well as stabilization or destabilization effects. Specifically, there is strong evidence that the Japanese Central Bank strengthens the precious metal markets by increasing their returns and by causing stabilization effects, in contrast to the ECB, which has opposite results, mainly due to the heterogeneous expectations of investors within these markets. These asymmetries across central banks' effects on gold and silver risk–return profile imply that the ECB unconventional monetary easing informational content opposes its stated mission, adding uncertainty in precious metals markets.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Sogiakas, Dr Vasilios
Authors: Papadamou, S., and Sogiakas, V.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Forecasting
Publisher:Wiley
ISSN:0277-6693
ISSN (Online):1099-131
Published Online:31 March 2017
Copyright Holders:Copyright © 2017 John Wiley and Sons Ltd
First Published:First published in Journal of Forecasting 37(1): 16-36
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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