THE GOLD AND SILVER FUTURES MARKETS: AN ANALYSIS OF SHORT-TERM PRICE REVERSAL BEHAVIOR

Many studies of stock markets provide evidence of overreaction and price reversals. Using a contrarian-trading scheme, this study provides evidence that price reversals in the gold and silver futures markets are related to information flow, change in trading volume, and intraday volatility. A larger information flow is associated with larger price reversals. Large price reversals also tend to occur on days with lower trading volume and days with a sharp change in trading volume from the prior day. Negative market movements are associated with larger price reversals than positive market movements. Larger price reversals also tend to occur on days with high intraday volatility.