Gold price dynamics and the role of uncertainty
By J. Beckmann, Theo Berger, Robert L. Czudaj. Quantitative finance (Print), 2018
142 citations recorded by the source corpus.
This study focuses on the dynamics of the gold price against bonds, stocks and exchange rates based on a disaggregation of the underlying relationships across different frequencies applying a wavelet decomposition. To analyze joint extreme movements (i.e. tail dependence), we adopt a copula approach, which helps us to assess the dependence between the returns of gold and other assets in calm and turmoil market times and therefore the hedge and safe haven functions of gold. We also examine whether gold prices are directly affected by changes in macroeconomic uncertainty, economic policy uncertainty and/or CPI forecasters disagreement. Analyzing data for nine economies for a sample period starting in 1985, we find that the role of gold changes significantly after the collapse of Lehman Brothers in 2008. Gold is unable to serve as a hedge or safe haven in the classical sense while the findings for the period prior to 2008 mostly suggest that gold is able to shield investors. Uncertainty measures display a surprising and time-varying relationship with the path of the gold price. While economic policy uncertainty is positively correlated with gold price changes, macroeconomic uncertainty and inflation uncertainty among forecasters are both negatively related to gold price changes.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/ad352b72b480bb269069dd779224c8a19ce60b78
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Citations in the corpus
- Measuring the response of gold prices to uncertainty: An analysis beyond the mean (2018, background): “Interestingly, as documented by the previous studies on the same issue, we show that the different uncertainty measures display heterogenuous impacts on gold returns (for example, Blose, 2010; Jones and Sackley, 2016; Balcilar et al. 2016; Beckmann et al. 2017).”