Methodology of identifying super-cycles in silver prices

Date

2023-8

Author

Soysal, Tuğba

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Silver is mainly used in industry and it also has started to attract attention as an investment tool in recent years. In periods of economic expansion and increased industrial activity, there is a tendency for the demand for silver to rise, which might push prices higher. Contrarily, economic downturns or financial crises may limit industrial demand for silver and cause prices to decline. This thesis aims to provide important insights into the potential upward gains and downward losses and the time required for the super-cycle to end. To do that the highest possible increase and also the highest possible drop in silver prices are estimated, and the duration of the cycle is examined. The highest possible increase means the highest possible gain in finance. Conversely, the highest possible drop means the highest possible loss. The study used the concept of super-cycles, that consist of both upward and downward movements in the price series, to pinpoint the data point with the maximum gain or maximum loss in the silver price covering the year 2005 and 2023. These super-cycles were extracted using the Hodrick Prescott economic filtering approach by excluding the trend components and smoothing the data. Fractional Brownian motion model is used to simulate silver prices. The fBm is selected because it is considered realistic due to its ability to portray long-term dependent behavior. In the end of this study, simulation results which indicate the expected duration of the super-cycle are presented.

Subject Keywords

Silver prices, Maximum drawup, Maximum drawdown, Fractional Brownian Motion, Super-cycles, Hodrick Prescott Filter

URI

https://hdl.handle.net/11511/105213

Collections

Graduate School of Natural and Applied Sciences, Thesis