Is gold worth an investment ? a case study of Malaysia

Salman, Firdaus and Masih, Mansur (2017): Is gold worth an investment ? a case study of Malaysia.

Abstract

This paper attempts to test the possible directions of causality of gold price movements in Malaysia with other financial determinants. Additionally, the study wants to prove whether real gold price is cointegrated with other variables for the case of Malaysia. The methods used in this paper are a range of multivariate time series techniques namely the cointegration tests (Johansen and Engle-Granger), vector error correction model (VECM), and one of the recently developed ‘long run structural modeling (LRSM)’, which imposes the exact identification and over identification restrictions on the cointegrating vectors. It estimates whether they are atheoretical in nature or not. In determining the exogeneity or endogeneity and the relative degree of it, variance decomposition technique is incorporated in this study. Based on the findings through techniques, the results tend to suggest that the real gold price is the leading variable in the case of Malaysia. Gold is indeed worth as an investment as it leads other factors namely inflation, exchange rate, crude oil price and the stock market.

• Item Type: MPRA Paper
• Language: English
• Keywords: real gold price, VECM, VDC, Malaysia
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy

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