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Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold
Author(s) -
Baur Dirk G.,
Lucey Brian M.
Publication year - 2010
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2010.00244.x
Subject(s) - hedge , safe haven , stock (firearms) , bond , portfolio , haven , financial economics , economics , uncorrelated , stock market , gold as an investment , econometrics , german , monetary economics , finance , mathematics , statistics , geography , context (archaeology) , ecology , archaeology , combinatorics , biology
Is gold a hedge, defined as a security that is uncorrelated with stocks or bonds on average, or is it a safe haven, defined as a security that is uncorrelated with stocks and bonds in a market crash? We study constant and time‐varying relations between U.S., U.K. and German stock and bond returns and gold returns to investigate gold as a hedge and a safe haven. We find that gold is a hedge against stocks on average and a safe haven in extreme stock market conditions. A portfolio analysis further shows that the safe haven property is short‐lived.