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Safe Haven Assets and Investor Behavior Under Uncertainty

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Abstract

We study two different safe haven assets, US government bonds and gold, and examine how the price changes of these assets can be used to infer investor behavior under uncertainty. We find that investors are ambiguity-averse, that is they buy gold when faced with extreme uncertainty about the state of the economy or the financial system and when they receive ambiguous signals. In contrast, investors buy US government bonds when faced with extreme but unambiguous signals.

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File URL: http://www.finance.uts.edu.au/research/wpapers/wp173.pdf
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Bibliographic Info

Paper provided by Finance Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 173.

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Length: 58
Date of creation: 01 Aug 2012
Date of revision:
Handle: RePEc:uts:wpaper:173

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Keywords: safe haven; uncertainty; gold; bonds; Ellsberg decision rule; black swan event;

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