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A Statistical Analysis to Evaluate whether Gold Is Still the Safe Haven of Old |
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PP: 1447-1463 |
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doi:10.18576/jsap/130503
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Author(s) |
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Neo Moji,
Boitumelo Matlou,
Sibongiseni Mncela,
Frans Koning,
Sandile C. Shongwe,
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Abstract |
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| Gold is revered for its tangible nature, historical usage as a currency, and its role as a store of value, particularly during times of economic turmoil. This research delves into the enduring allure of gold as a valuable asset in financial markets and examines whether the attributes that have sustained its prominence throughout history are still applicable. We have elected to focus on the log returns of gold, three stock indices (namely, the MSCI World Index, S&P 500, FTSE 100) and a cryptocurrency (i.e. Bitcoin) in the 21st century, for a period spanning from 1/1/2000 to 31/5/2023 (which has not been studied so far in the literature). This analysis serves a dual purpose: studying the relationships between gold and the other variables; and assessing its ability to be a hedge or safe haven for them. For the first part, we use a generalized autoregressive conditional heteroskedasticity (GARCH) model to study the conditional volatility, rolling window correlation and a vector autoregressive (VAR) model; for the second part, we use the classical linear regression method. Our analysis employs a mixture of methodologies found to be prominent in existing literature so that our results may remain comparable. We ultimately find that gold retains the attributes under study, although they seem to be deteriorating in strength compared to what has been observed previously. |
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