Long Memory and Structural Breaks in the Returns and Volatility of Gold: Evidence from Turkey

Abstract

This paper examines the long memory properties and structural breaks in spot and futures gold returns and volatility in Turkey. The data covers the period from 2008 through 2013 in which gold prices hit an all-time high. ARFIMA-FIGARCH model provides evidence of anti-persistence in spot returns and a lack of long memory property in futures returns. Anti-persistence is indicative of an overreaction of gold prices to new information, thus, disconfirming the weak form of market efficiency. The findings further provide evidence of one structural break, which is associated with correction in the gold prices during the post-global financial crisis. The analysis suggests that the long memory is true, not spurious. This implies that long memory is a feature of the data instead of an outcome of structural changes.