Stationarity of prices of precious and industrial metals using recent unit root methods: Implications for markets’ efficiency

Resources Policy. 2020. Vol. 65. No. 101560. P. 1–21.

Adewuyi A., Wahab B. A., Adeboye O.

This study investigated stationarity properties of prices of four precious metals (Gold, Palladium, Platinum and
Silver) and seven industrial metals (Aluminium, Copper, Lead, Nickel, Steel, Tin, and Zinc) during 1960–2017
using diverse unit root test approaches, especially the recent ones that take cognisance of both non-linearity and
structural break(yet to find applications). Prices of seven of the eleven metals are stationary based on the results
of most of the conventional unit root tests used. However, prices of all metals are stationary based on the results of
at least three of five unit root tests with structural break performed. Further, prices of both the precious and industrial
metals are stationary based on the results of all the three non-linear unit root tests performed including one
with structural break. Also, when linearity structures of metal prices together with structural break are taking into
account, prices of the four precious and seven industrial metals are stationary. Findings imply that policy makers
can forecast and formulate policies pertaining to metals, particularly revenue forecasting and risk management.
It may be uneasy for metals’ market participants to reap abnormal returns. Also, research should consider the
issues of structural break and non-linearity in econometrics modelling.

Keywords: unit root