The Autumn Effect of Gold. 2013
Baur offers the first examination of whether gold returns are affected by the Autumn Effect, as has been found to be the case for other financial asset classes.
September and November are found to have significant and positive returns, even after accounting for other factors such as the trade weighted value of the dollar, volatility, stock market returns and US interest rates. To assess whether this is common among precious metals the same analysis is carried out for silver but no months are found to have significantly positive or negative returns. When the analysis looks at seasons as opposed to month autumn is found to be significantly positive, confirming the earlier finding. The variance of gold returns are also found to be higher in the autumn.
Data: Daily 1981 – 2010. Daily gold Futures prices, London fixings prices for gold and silver, GSCI commodities index, GSCI precious metals index.
Methodology: GARCH with dummies and Asymmetric GARCH, Quantile Regression.
Citation: Baur, Dirk G. “The autumn effect of gold.” Research in International Business and Finance 27.1 (2013): 1-11.
Abstract: This paper studies recurring annual events potentially introducing seasonality into gold prices. We analyze gold returns for each month from 1980 to 2010 and find that September and November are the only months with positive and statistically significant gold price changes. This “autumn effect” holds unconditionally and conditional on several risk factors. We argue that the anomaly can be explained with hedging demand by investors in anticipation of the “Halloween effect” in the stock market, wedding season gold jewelery demand in India and negative investor sentiment due to shorter daylight time. The autumn effect can also be characterized by a higher unconditional and conditional volatility than in other seasons.