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Gold, platinum, and industry stock returns

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  • Pham, Quynh Thi Thuy
  • Rudolf, Markus

Abstract

This paper extends the work of Huang and Kilic (2019) by examining whether the ratio of gold to platinum prices (GP) leads United States industry stock returns in-sample and out-of-sample over short and intermediate horizons. Using monthly data from 1975 to 2019, we find that GP predicts cyclical industry excess returns better than defensive industry excess returns. The one-month out-of-sample forecast by GP is weak but economically meaningful for mean-variance investors. As an illustration, a one-month GP-based trading strategy generates an average certainty equivalent return that is approximately 2.4% p. a. higher than the buy-and-hold strategy across all industries.

Suggested Citation

  • Pham, Quynh Thi Thuy & Rudolf, Markus, 2021. "Gold, platinum, and industry stock returns," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 252-266.
    • Handle: RePEc:eee:reveco:v:75:y:2021:i:c:p:252-266
    DOI: 10.1016/j.iref.2021.04.002
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    Cited by:

    1. Riza Demirer & David Gabauer & Rangan Gupta & Joshua Nielsen, 2023. "Gold-to-Platinum Price Ratio and the Predictability of Bubbles in Financial Markets," Working Papers 202317, University of Pretoria, Department of Economics.

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    More about this item

    Keywords

    Stock return predictability; Industry portfolios; Gold-to-platinum;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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