IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-02352004.html
   My bibliography  Save this paper

Gold as Safe Haven for G-7 Stocks and Bonds: A Revisit

Author

Listed:
  • Syed Jawad Hussain Shahzad

    (Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School)

  • Naveed Raza

    (CIIT - COMSATS Institute of Information Technology [Islamabad])

  • David Roubaud

    (Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School)

  • Jose Arreola Hernandez

    (ESC [Rennes] - ESC Rennes School of Business)

  • Stelios Bekiros

    (Department of Economics - EUI - European University Institute)

Abstract

We examine the safe haven property of gold for stock and bond markets of G-7 countries. In doing so, we use the novel vector autoregressive for value-at-risk and the cross-quantilogram methods. These quantile-dependence measures help to examine how gold returns react to stock/bond returns when the markets are in a bearish state. The gold market is comparatively less sensitive to bond market innovations and more sensitive to stock market innovations. The tail dependence analysis, through cross-quantilogram, indicates that stock/bond returns significantly and positively spillover to the gold markets when both markets are in a bearish state. Furthermore, the findings of time-varying quantile dependence analysis, obtained by recursive sample estimations, are analogous to the full sample results. Hence, the evidence suggests that gold does not act as a safe haven for the stock and bond markets. Implications of the results are discussed.

Suggested Citation

  • Syed Jawad Hussain Shahzad & Naveed Raza & David Roubaud & Jose Arreola Hernandez & Stelios Bekiros, 2019. "Gold as Safe Haven for G-7 Stocks and Bonds: A Revisit," Post-Print hal-02352004, HAL.
    • Handle: RePEc:hal:journl:hal-02352004
    DOI: 10.1007/s40953-019-00163-1
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Śmiech, Sławomir & Papież, Monika, 2017. "In search of hedges and safe havens: Revisiting the relations between gold and oil in the rolling regression framework," Finance Research Letters, Elsevier, vol. 20(C), pages 238-244.
    2. Choudhry, Taufiq & Hassan, Syed S. & Shabi, Sarosh, 2015. "Relationship between gold and stock markets during the global financial crisis: Evidence from nonlinear causality tests," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 247-256.
    3. Kaul, Aditya & Sapp, Stephen, 2006. "Y2K fears and safe haven trading of the U.S. dollar," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 760-779, August.
    4. Baur, Dirk G. & McDermott, Thomas K., 2010. "Is gold a safe haven? International evidence," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1886-1898, August.
    5. Bekiros, Stelios & Boubaker, Sabri & Nguyen, Duc Khuong & Uddin, Gazi Salah, 2017. "Black swan events and safe havens: The role of gold in globally integrated emerging markets," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 317-334.
    6. Wen, Xiaoqian & Cheng, Hua, 2018. "Which is the safe haven for emerging stock markets, gold or the US dollar?," Emerging Markets Review, Elsevier, vol. 35(C), pages 69-90.
    7. Wang, Kuan-Min & Lee, Yuan-Ming, 2016. "Hedging exchange rate risk in the gold market: A panel data analysis," Journal of Multinational Financial Management, Elsevier, vol. 35(C), pages 1-23.
    8. Raza, Naveed & Jawad Hussain Shahzad, Syed & Tiwari, Aviral Kumar & Shahbaz, Muhammad, 2016. "Asymmetric impact of gold, oil prices and their volatilities on stock prices of emerging markets," Resources Policy, Elsevier, vol. 49(C), pages 290-301.
    9. Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
    10. Selmi, Refk & Mensi, Walid & Hammoudeh, Shawkat & Bouoiyour, Jamal, 2018. "Is Bitcoin a hedge, a safe haven or a diversifier for oil price movements? A comparison with gold," Energy Economics, Elsevier, vol. 74(C), pages 787-801.
    11. Linton, O. & Whang, Yoon-Jae, 2007. "The quantilogram: With an application to evaluating directional predictability," Journal of Econometrics, Elsevier, vol. 141(1), pages 250-282, November.
    12. Chkili, Walid, 2017. "Is gold a hedge or safe haven for Islamic stock market movements? A Markov switching approach," Journal of Multinational Financial Management, Elsevier, vol. 42, pages 152-163.
    13. Zhang, Jinqing & Jin, Zeyu & An, Yunbi, 2017. "Dynamic portfolio optimization with ambiguity aversion," Journal of Banking & Finance, Elsevier, vol. 79(C), pages 95-109.
    14. Reboredo, Juan C. & Rivera-Castro, Miguel A., 2014. "Gold and exchange rates: Downside risk and hedging at different investment horizons," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 267-279.
    15. Chkili, Walid, 2016. "Dynamic correlations and hedging effectiveness between gold and stock markets: Evidence for BRICS countries," Research in International Business and Finance, Elsevier, vol. 38(C), pages 22-34.
    16. El Hedi Arouri, Mohamed & Lahiani, Amine & Nguyen, Duc Khuong, 2015. "World gold prices and stock returns in China: Insights for hedging and diversification strategies," Economic Modelling, Elsevier, vol. 44(C), pages 273-282.
    17. Jose Arreola Hernandez & Shawkat Hammoudeh & Duc Khuong Nguyen & Mazin A. M. Al Janabi & Juan Carlos Reboredo, 2017. "Global financial crisis and dependence risk analysis of sector portfolios: a vine copula approach," Applied Economics, Taylor & Francis Journals, vol. 49(25), pages 2409-2427, May.
    18. Ciner, Cetin & Gurdgiev, Constantin & Lucey, Brian M., 2013. "Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 202-211.
    19. Basher, Syed Abul & Sadorsky, Perry, 2016. "Hedging emerging market stock prices with oil, gold, VIX, and bonds: A comparison between DCC, ADCC and GO-GARCH," Energy Economics, Elsevier, vol. 54(C), pages 235-247.
    20. Aye, Goodness C. & Chang, Tsangyao & Gupta, Rangan, 2016. "Is gold an inflation-hedge? Evidence from an interrupted Markov-switching cointegration model," Resources Policy, Elsevier, vol. 48(C), pages 77-84.
    21. Beckmann, Joscha & Berger, Theo & Czudaj, Robert, 2015. "Does gold act as a hedge or a safe haven for stocks? A smooth transition approach," Economic Modelling, Elsevier, vol. 48(C), pages 16-24.
    22. Han, Heejoon & Linton, Oliver & Oka, Tatsushi & Whang, Yoon-Jae, 2016. "The cross-quantilogram: Measuring quantile dependence and testing directional predictability between time series," Journal of Econometrics, Elsevier, vol. 193(1), pages 251-270.
    23. Gorton, Gary & Pennacchi, George, 1990. "Financial Intermediaries and Liquidity Creation," Journal of Finance, American Finance Association, vol. 45(1), pages 49-71, March.
    24. Iqbal, Javed, 2017. "Does gold hedge stock market, inflation and exchange rate risks? An econometric investigation," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 1-17.
    25. White, Halbert & Kim, Tae-Hwan & Manganelli, Simone, 2015. "VAR for VaR: Measuring tail dependence using multivariate regression quantiles," Journal of Econometrics, Elsevier, vol. 187(1), pages 169-188.
    26. Gary Gorton & Stefan Lewellen & Andrew Metrick, 2012. "The Safe-Asset Share," American Economic Review, American Economic Association, vol. 102(3), pages 101-106, May.
    27. Brian M. Lucey & Sile Li, 2015. "What precious metals act as safe havens, and when? Some US evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 22(1), pages 35-45, January.
    28. Stoyu Ivanov, 2013. "The influence of ETFs on the price discovery of gold, silver and oil," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 37(3), pages 453-462, July.
    29. Flavin, Thomas J. & Morley, Ciara E. & Panopoulou, Ekaterini, 2014. "Identifying safe haven assets for equity investors through an analysis of the stability of shock transmission," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 137-154.
    30. Balcilar, Mehmet & Bonato, Matteo & Demirer, Riza & Gupta, Rangan, 2017. "The effect of investor sentiment on gold market return dynamics: Evidence from a nonparametric causality-in-quantiles approach," Resources Policy, Elsevier, vol. 51(C), pages 77-84.
    31. Manganelli, Simone & White, Halbert & Kim, Tae-Hwan, 2008. "Modeling autoregressive conditional skewness and kurtosis with multi-quantile CAViaR," Working Paper Series 957, European Central Bank.
    32. Baur, Dirk G. & McDermott, Thomas K.J., 2016. "Why is gold a safe haven?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 10(C), pages 63-71.
    33. Bekiros, Stelios & Hernandez, Jose Arreola & Hammoudeh, Shawkat & Nguyen, Duc Khuong, 2015. "Multivariate dependence risk and portfolio optimization: An application to mining stock portfolios," Resources Policy, Elsevier, vol. 46(P2), pages 1-11.
    34. Sakemoto, Ryuta, 2018. "Do precious and industrial metals act as hedges and safe havens for currency portfolios?," Finance Research Letters, Elsevier, vol. 24(C), pages 256-262.
    35. Bouri, Elie & Jain, Anshul & Biswal, P.C. & Roubaud, David, 2017. "Cointegration and nonlinear causality amongst gold, oil, and the Indian stock market: Evidence from implied volatility indices," Resources Policy, Elsevier, vol. 52(C), pages 201-206.
    36. Bredin, Don & Conlon, Thomas & Potì, Valerio, 2015. "Does gold glitter in the long-run? Gold as a hedge and safe haven across time and investment horizon," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 320-328.
    37. Hood, Matthew & Malik, Farooq, 2013. "Is gold the best hedge and a safe haven under changing stock market volatility?," Review of Financial Economics, Elsevier, vol. 22(2), pages 47-52.
    38. Mensi, Walid & Hammoudeh, Shawkat & Reboredo, Juan C. & Nguyen, Duc Khuong, 2015. "Are Sharia stocks, gold and U.S. Treasury hedges and/or safe havens for the oil-based GCC markets?," Emerging Markets Review, Elsevier, vol. 24(C), pages 101-121.
    39. Hussain Shahzad, Syed Jawad & Raza, Naveed & Shahbaz, Muhammad & Ali, Azwadi, 2017. "Dependence of stock markets with gold and bonds under bullish and bearish market states," Resources Policy, Elsevier, vol. 52(C), pages 308-319.
    40. Low, Rand Kwong Yew & Yao, Yiran & Faff, Robert, 2016. "Diamonds vs. precious metals: What shines brightest in your investment portfolio?," International Review of Financial Analysis, Elsevier, vol. 43(C), pages 1-14.
    41. Nguyen, Cuong & Bhatti, M. Ishaq & Komorníková, Magda & Komorník, Jozef, 2016. "Gold price and stock markets nexus under mixed-copulas," Economic Modelling, Elsevier, vol. 58(C), pages 283-292.
    42. Dirk G Baur & Kristoffer Glover, 2012. "The Destruction of a Safe Haven Asset?," Working Paper Series 174, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    43. Mark, Joy, 2011. "Gold and the US dollar: Hedge or haven?," Finance Research Letters, Elsevier, vol. 8(3), pages 120-131, September.
    44. Agyei-Ampomah, Sam & Gounopoulos, Dimitrios & Mazouz, Khelifa, 2014. "Does gold offer a better protection against losses in sovereign debt bonds than other metals?," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 507-521.
    45. Ghazali, Mohd Fahmi & Lean, Hooi Hooi & Bahari, Zakaria, 2015. "Sharia compliant gold investment in Malaysia: Hedge or safe haven?," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 192-204.
    46. Mensi, Walid & Hammoudeh, Shawkat & Tiwari, Aviral Kumar, 2016. "New evidence on hedges and safe havens for Gulf stock markets using the wavelet-based quantile," Emerging Markets Review, Elsevier, vol. 28(C), pages 155-183.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Muhammad Abubakr Naeem & Saqib Farid & Safwan Mohd Nor & Syed Jawad Hussain Shahzad, 2021. "Spillover and Drivers of Uncertainty among Oil and Commodity Markets," Mathematics, MDPI, vol. 9(4), pages 1-26, February.
    2. Kumar, Anoop S & Padakandla, Steven Raj, 2022. "Testing the safe-haven properties of gold and bitcoin in the backdrop of COVID-19: A wavelet quantile correlation approach," Finance Research Letters, Elsevier, vol. 47(PB).
    3. Ali, Sajid & Bouri, Elie & Czudaj, Robert Lukas & Shahzad, Syed Jawad Hussain, 2020. "Revisiting the valuable roles of commodities for international stock markets," Resources Policy, Elsevier, vol. 66(C).
    4. Makushkin, Mikhail & Lapshin, Victor, 2020. "Modelling tail dependencies between Russian and foreign stock markets: Application for market risk valuation," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 57, pages 30-52.
    5. Enilov, Martin & Mensi, Walid & Stankov, Petar, 2023. "Does safe haven exist? Tail risks of commodity markets during COVID-19 pandemic," Journal of Commodity Markets, Elsevier, vol. 29(C).
    6. Naeem, Muhammad Abubakr & Hasan, Mudassar & Arif, Muhammad & Balli, Faruk & Shahzad, Syed Jawad Hussain, 2020. "Time and frequency domain quantile coherence of emerging stock markets with gold and oil prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 553(C).
    7. Khaskheli, Asadullah & Zhang, Hongyu & Raza, Syed Ali & Khan, Komal Akram, 2022. "Assessing the influence of news indicator on volatility of precious metals prices through GARCH-MIDAS model: A comparative study of pre and during COVID-19 period," Resources Policy, Elsevier, vol. 79(C).
    8. Ustaoglu, Erkan, 2023. "Diversification, hedge, and safe-haven properties of gold and bitcoin with portfolio implications during the Russia–Ukraine war," Resources Policy, Elsevier, vol. 84(C).
    9. Umar, Zaghum & Bossman, Ahmed & Choi, Sun-Yong & Teplova, Tamara, 2023. "The relationship between global risk aversion and returns from safe-haven assets," Finance Research Letters, Elsevier, vol. 51(C).
    10. Akhtaruzzaman, Md & Boubaker, Sabri & Lucey, Brian M. & Sensoy, Ahmet, 2021. "Is gold a hedge or a safe-haven asset in the COVID–19 crisis?," Economic Modelling, Elsevier, vol. 102(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ali, Sajid & Bouri, Elie & Czudaj, Robert Lukas & Shahzad, Syed Jawad Hussain, 2020. "Revisiting the valuable roles of commodities for international stock markets," Resources Policy, Elsevier, vol. 66(C).
    2. Naeem, Muhammad Abubakr & Qureshi, Fiza & Arif, Muhammad & Balli, Faruk, 2021. "Asymmetric relationship between gold and Islamic stocks in bearish, normal and bullish market conditions," Resources Policy, Elsevier, vol. 72(C).
    3. Talbi, Marwa & Bedoui, Rihab & de Peretti, Christian & Belkacem, Lotfi, 2021. "Is the role of precious metals as precious as they are? A vine copula and BiVaR approaches," Resources Policy, Elsevier, vol. 73(C).
    4. Hussain Shahzad, Syed Jawad & Raza, Naveed & Shahbaz, Muhammad & Ali, Azwadi, 2017. "Dependence of stock markets with gold and bonds under bullish and bearish market states," Resources Policy, Elsevier, vol. 52(C), pages 308-319.
    5. Adewuyi, Adeolu O. & Awodumi, Olabanji B. & Abodunde, Temitope T., 2019. "Analysing the gold-stock nexus using VARMA-BEKK-AGARCH and Quantile regression models: New evidence from South Africa and Nigeria," Resources Policy, Elsevier, vol. 61(C), pages 348-362.
    6. Adekoya, Oluwasegun B. & Oliyide, Johnson A. & Oduyemi, Gabriel O., 2021. "How COVID-19 upturns the hedging potentials of gold against oil and stock markets risks: Nonlinear evidences through threshold regression and markov-regime switching models," Resources Policy, Elsevier, vol. 70(C).
    7. Abdelbari El Khamlichi & Thi Hong Van Hoang & Wing‐keung Wong, 2016. "Is Gold Different for Islamic and Conventional Portfolios? A Sectorial Analysis," Post-Print hal-02965765, HAL.
    8. Hoang, Thi-Hong-Van & Zhu, Zhenzhen & El Khamlichi, Abdelbari & Wong, Wing-Keung, 2019. "Does the Shari’ah screening impact the gold-stock nexus? A sectorial analysis," Resources Policy, Elsevier, vol. 61(C), pages 617-626.
    9. Alkhazali, Osamah M. & Zoubi, Taisier A., 2020. "Gold and portfolio diversification: A stochastic dominance analysis of the Dow Jones Islamic indices," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    10. Enilov, Martin & Mensi, Walid & Stankov, Petar, 2023. "Does safe haven exist? Tail risks of commodity markets during COVID-19 pandemic," Journal of Commodity Markets, Elsevier, vol. 29(C).
    11. Hoang, Thi-Hong-Van & Wong, Wing-Keung & Zhu, Zhenzhen, 2015. "Is gold different for risk-averse and risk-seeking investors? An empirical analysis of the Shanghai Gold Exchange," Economic Modelling, Elsevier, vol. 50(C), pages 200-211.
    12. Salisu, Afees A. & Adediran, Idris, 2020. "Gold as a hedge against oil shocks: Evidence from new datasets for oil shocks," Resources Policy, Elsevier, vol. 66(C).
    13. Alqaralleh, Huthaifa & Canepa, Alessandra, 2022. "The role of precious metals in portfolio diversification during the Covid19 pandemic: A wavelet-based quantile approach," Resources Policy, Elsevier, vol. 75(C).
    14. Zhang, Yongjie & Wang, Meng & Xiong, Xiong & Zou, Gaofeng, 2021. "Volatility spillovers between stock, bond, oil, and gold with portfolio implications: Evidence from China," Finance Research Letters, Elsevier, vol. 40(C).
    15. Rizvi, Syed Kumail Abbas & Naqvi, Bushra & Mirza, Nawazish & Umar, Muhammad, 2022. "Safe haven properties of green, Islamic, and crypto assets and investor's proclivity towards treasury and gold," Energy Economics, Elsevier, vol. 115(C).
    16. Dibooglu, Sel & Cevik, Emrah I. & Gillman, Max, 2022. "Gold, silver, and the US dollar as harbingers of financial calm and distress," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 200-210.
    17. Tweneboah, George & Owusu Junior, Peterson & Kumah, Seyram Pearl, 2020. "Modelling the asymmetric linkages between spot gold prices and African stocks," Research in International Business and Finance, Elsevier, vol. 54(C).
    18. Ali, Sajid & Raza, Naveed & Vinh Vo, Xuan & Le, Van, 2022. "Modelling the joint dynamics of financial assets using MGARCH family models: Insights into hedging and diversification strategies," Resources Policy, Elsevier, vol. 78(C).
    19. Wen, Fenghua & Tong, Xi & Ren, Xiaohang, 2022. "Gold or Bitcoin, which is the safe haven during the COVID-19 pandemic?," International Review of Financial Analysis, Elsevier, vol. 81(C).
    20. Wen, Xiaoqian & Cheng, Hua, 2018. "Which is the safe haven for emerging stock markets, gold or the US dollar?," Emerging Markets Review, Elsevier, vol. 35(C), pages 69-90.

    More about this item

    Keywords

    Gold market; Financial markets; Spillovers; Diversification; Tail dependence;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-02352004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.