Gomis-Porqueras, Pedro and Shi, Shuping and Tan, David (2020): Gold as a Financial Instrument.
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Abstract
In this paper, we explore the effectiveness of gold as a hedging and safe haven instrument for a variety of market risks. Rather than confining the analysis to specific countries, we treat gold as a global asset and apply the novel Phillips, Shi and Yu (2015a,b) methodology to identify extreme price movements. This method accounts for both the level and speed of changes in price dynamics that better characterises periods of abnormally high risks. We find that gold is a strong safe haven for stock, European sovereign, and oil inflation market risks. We also show that gold is a strong hedge to inflationary and currency risks. We demonstrate that gold had exhibited safe haven properties during the 2020 Covid-19 crisis, and highlight the importance of considering explosive behaviour in identifying periods of risk.
Item Type: | MPRA Paper |
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Original Title: | Gold as a Financial Instrument |
English Title: | Gold as a Financial Instrument |
Language: | English |
Keywords: | Gold; Hedge; Safe Haven; Sovereign Debt; Equity Markets. |
Subjects: | E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy G - Financial Economics > G0 - General |
Item ID: | 102782 |
Depositing User: | Pedro Gomis-Porqueras |
Date Deposited: | 13 Sep 2020 19:58 |
Last Modified: | 13 Sep 2020 19:58 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/102782 |