Cointegration and Causality Between the Platinum Market and the Palladium Market

Abstract

Despite the fact that platinum and palladium are two out of four major precious metals and become more and more attractive as investment vehicles, there has been little research on these two markets in terms of their times series characteristics. We examine cointegrating and causal relationships between the platinum market and the palladium market. While we identify no cointegration between these two markets, we find that palladium returns and volatilities Granger-cause platinum returns and volatilities. Our findings are expected to provide critical information to financial market participants in terms of portfolio or asset management.