Gold's Price and Advanced Stock Markets: A Post-Crisis Approach

Gold's Price and Advanced Stock Markets: A Post-Crisis Approach

Nikolaos Stoupos (University of Macedonia, Greece & University of Patras, Greece) and Apostolos Kiohos (University of Macedonia, Greece)
Copyright: © 2020 |Pages: 14
DOI: 10.4018/978-1-7998-2436-7.ch007

Abstract

Traditionally, the gold has been approved as a safe-haven investment after the collapse of Breton Woods. The global investors especially prefer to rebalance their portfolios by purchasing gold or its derivatives during financial crises. This research explores realized dynamic linkages between gold and the advanced stock market indices, after the end of the 2008 economic recession. This chapter used the fractionally co-integrated ECM by utilizing intraday data from 2013 and thereafter. The empirical outcomes support that there is a negative-realized dynamics between the advanced stock markets and the gold's price in the short and in the long run. Specifically, the short-term dynamics of gold's price seems to be higher on the French and Japanese stock market indices. Lastly, the long-term dynamics of gold's price seems to be higher on the Dow Jones and the FTSE100.
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Literature Review

Singhal et al. (2019) investigated the dynamic relationship among international oil prices, international gold prices, exchange rate and stock market index in Mexico. Their findings suggest that international gold prices positively affect the stock price of Mexico while oil price affects them negatively. Boako et al. (2018) found out evidence of a significant co-jump of gold and stock market returns. This is in sharp contrast to the safe-haven and diversification attributes of gold. According to Huang and Kilic (2018) The ratio of gold to platinum prices (GP) reveals persistent variation in risk and proxies for an important economic state variable. In specific GP ratio predicts future stock returns in the time series, explains stock return variation in the cross-section, and is significantly correlated with option-implied tail risk measures. Irandust (2017) examined the causal linkage between metal prices and share values for 10 European countries over the period of January 2011 to September 2016. His result show that the metal price index and stock price index are not causally related. Bouri et al. (2017) utilized implied volatility indices and examine short-term and long-term causality dynamics between gold and the Chinese and Indian stock markets. They discovered significant bi-directional effects between gold and the Chinese and Indian stock markets in both high and low frequencies, suggesting that the safe-haven property of gold is not stable.

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