The Gold Price in Times of Crisis (2014)
PublisherUniversity of Canterbury. Department of Economics and Finance
Motivated by the recent gold price boom, this paper investigates whether rapidly growing investment activities have caused a new asset price bubble. Drawing on gold's role as dollar hedge, inflation hedge, portfolio diversifier, and safe haven, we calculate fundamentally justified returns, approximate gold's fundamental value, and apply a Markov regime-switching Augmented Dickey-Fuller (ADF) test which has substantial power for detecting explosive behavior. Although our results are sensitive to the specification of the fundamental value, we show that a model accounting for the current European sovereign debt crisis accurately tracks the gold price observed in the market.
CitationBialkowski J. Bohl M.T., Stephan P.M, Wisniewski T. (2014) The Gold Price in Times of Crisis. Nashville, USA: Financial Management Association, Annual Meeting, 15-18 Oct 2014.
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ANZSRC Fields of Research38 - Economics::3801 - Applied economics::380107 - Financial economics
14 - Economics::1402 - Applied Economics::140210 - International Economics and International Finance
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