Table of Contents
Economics Research International
Volume 2016 (2016), Article ID 2361954, 7 pages
http://dx.doi.org/10.1155/2016/2361954
Research Article

Do Scarce Precious Metals Equate to Safe Harbor Investments? The Case of Platinum and Palladium

Department of Finance and Department of Accounting, College of Business, Chung Yuan Christian University, 200 Chung Pei Road, Chungli City 32023, Taiwan

Received 23 July 2015; Revised 29 October 2015; Accepted 29 October 2015

Academic Editor: Jean Paul Chavas

Copyright © 2016 John Francis T. Diaz. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This research establishes the predictability and safe harbor properties of two scarce precious metals, namely, platinum and palladium. Utilizing their spot prices, the study concludes intermediate memory in the return structures of both precious metals, which implies the instability of platinum and palladium returns’ persistency in the long run. However, both the ARFIMA-FIGARCH and the ARFIMA-FIAPARCH models confirm long-memory properties in the volatility of the two spot prices. The leverage effects phenomenon is not also present based on the ARFIMA-APARCH and ARFIMA-FIAPARCH models, which may possibly conclude the resilience of both precious metals against increased volatility. However, further tests proved that only platinum has a symmetric volatility response to shocks with the presence of negative gamma parameter, which proves that only platinum can be considered a safe harbor investment, because negative and positive shocks have equal effects on their returns and volatilities. Comparing the four models utilized in this study, the combined ARFIMA-FIAPARCH models are the best fitting model to characterize both precious metals’ spot prices.