This thesis investigates the presence of speculative bubbles in the prices of precious metals. The investigation develops in three stages. First, we present the theoretical framework. Second, we carry out an institutional analysis of the gold market. Third, we conduct an econometric investigation using a comprehensive new data set of the prices of gold, silver and platinum. Speculation is a phenomenon strictly related to expectations. Hence, the natural theoretical framework for the study of speculative bubbles begins with a theory of expectations. The theory of speculative bubbles emerges from the non-uniqueness of solutions to rational expectations models. We present the theoretical background on the problem of multiple solutions to rational expectations models. We then critically examine the theoretical and empirical literature on speculative bubbles, pointing out the questions still unanswered in the field. The high volatility and the presumed speculative attacks in the 1970's and 1980's make the prices of gold, silver and platinum a natural choice for investigating the presence of speculative bubbles. An institutional analysis of the gold market show the complexity of the factors determining its price. This thesis adopts two empirical approaches. The first concerns tests of the restrictions that the presence of speculative bubbles impose on the prices of precious metals. In particular, it applies non-parametric tests in the spirit of the Blanchard and Watson (1982) approach to test for bubbles in the price of gold. Their results are contradictory and overall show little evidence of bubbles in the price of gold. In contrast, our results indicate the presence of speculative bubbles in the prices not only of gold, but also of silver and platinum. The second approach which, to our knowledge, has not previously been explored, consists of inferring the presence of bubbles through a comparison of the market fundamentals and the price movements of the three metals. The results provide evidence of the presence of speculative bubbles.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:309266 |
| Date | January 1986 |
| Creators | Bertero, Elisabetta Maria |
| Publisher | London School of Economics and Political Science (University of London) |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
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