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Unallocated Metal Accounts in Russia: Determinants of Quoted Bid-Ask Spreads

Author

Listed:
  • Elena V. Rozhentsova

    (HSE University, Perm 614000, Russian Federation)

  • Anastasiia D. Saltykova

    (HSE University, Perm 614000, Russian Federation)

  • Tatyana М. Devyatkova

    (JSC “UEC-Aviadvigatel”, Perm 614000, Russian Federation)

Abstract

Due to economic instability there has been an increase in demand for unallocated metal accounts offered by Russian commercial banks since April 2020. Although opening unallocated metal accounts gives banks an opportunity to expand the range of their products, diversify income, attract new clients and retain old ones, most Russian banks do not provide such services. For those, it is important to understand the determinants of bid-ask spreads (the difference between the quoted metal bid and ask prices), since the demand for unallocated metal accounts and the bank’s income from this service depend on the bid-ask spread. The purpose of this paper is to investigate the main determinants of quoted bid-ask spreads on unallocated metal accounts in commercial banks. Multiple regression models are applied for the period from October 2017 to May 2020. There are very few articles on the determinants of quoted bid-ask spreads on unallocated metal accounts; for this reason the paper is based on the results of studies of bid-ask spreads in other markets. Based on recent theoretical results, which indicate that bid-ask spreads depend on price volatility, we confirm this hypothesis on unallocated metal accounts. Moreover, we reveal that banks’ assets and the share of state participation influence bid-ask spreads on unallocated metal accounts in commercial banks. It is also proven that bid-ask spreads for unallocated metal accounts in gold are, on average, lower than those for palladium, platinum and silver.

Suggested Citation

  • Elena V. Rozhentsova & Anastasiia D. Saltykova & Tatyana М. Devyatkova, 2021. "Unallocated Metal Accounts in Russia: Determinants of Quoted Bid-Ask Spreads," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 1, pages 93-106, February.
    • Handle: RePEc:fru:finjrn:210106:p:93-106
    DOI: 10.31107/2075-1990-2021-1-93-106
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    More about this item

    Keywords

    unallocated metal account; bid-ask spread; price volatility; banking sector; gold market; precious metals market;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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