Advanced Search
MyIDEAS: Login

Safe Haven Assets and Investor Behavior Under Uncertainty

Contents:

Author Info

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.finance.uts.edu.au/research/wpapers/wp173.pdf
Download Restriction: no

Bibliographic Info

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

as in new window
Length: 58
Date of creation: 01 Aug 2012
Date of revision:
Handle: RePEc:uts:wpaper:173

Contact details of provider:
Postal: PO Box 123, Broadway, NSW 2007, Australia
Phone: +61 2 9514 7777
Fax: +61 2 9514 7711
Web page: http://www.uts.edu.au/about/uts-business-school/finance
More information through EDIRC

Related research

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

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Christian Upper, 2001. "How safe was the "Safe Haven"? Financial market liquidity during the 1998 turbulences," BIS Papers chapters, in: Bank for International Settlements (ed.), Market liquidity: proceedings of a workshop held at the BIS, volume 2, pages 241-266 Bank for International Settlements.
  2. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  3. Robert Engle, 2004. "Risk and Volatility: Econometric Models and Financial Practice," American Economic Review, American Economic Association, vol. 94(3), pages 405-420, June.
  4. Nicola Gennaioli & Andrei Shleifer, 2009. "What comes to mind," Economics Working Papers 1186, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2009.
  5. Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report 157, Federal Reserve Bank of Minneapolis.
  6. Dirk G. Baur & Thomas K. McDermott, . "Is gold a safe haven? International evidence," The Institute for International Integration Studies Discussion Paper Series iiisdp310, IIIS.
  7. P. Hartmann & S. Straetmans & C. G. de Vries, 2004. "Asset Market Linkages in Crisis Periods," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 313-326, February.
  8. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
  9. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
  10. Angelo Ranaldo & Paul Söderlind, 2007. "Safe Haven Currencies," Working Papers 2007-17, Swiss National Bank.
  11. Nicholas Barberis & Andrei Shleifer & Robert W. Vishny, 1997. "A Model of Investor Sentiment," NBER Working Papers 5926, National Bureau of Economic Research, Inc.
  12. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
  13. Ben S. Bernanke, 1980. "Irreversibility, Uncertainty, and Cyclical Investment," NBER Working Papers 0502, National Bureau of Economic Research, Inc.
  14. 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.
  15. Pastor, Lubos & Stambaugh, Robert F., 2003. "Liquidity Risk and Expected Stock Returns," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 642-685, June.
  16. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
  17. Capie, Forrest & Mills, Terence C. & Wood, Geoffrey, 2005. "Gold as a hedge against the dollar," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(4), pages 343-352, October.
  18. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  19. Sheila C. Dow, 2011. "Cognition, market sentiment and financial instability," Cambridge Journal of Economics, Oxford University Press, vol. 35(2), pages 233-249.
  20. Ricardo J. Caballero & Arvind Krishnamurthy, 2007. "Collective Risk Management in a Flight to Quality Episode," NBER Working Papers 12896, National Bureau of Economic Research, Inc.
  21. Camerer, Colin & Weber, Martin, 1992. " Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-70, October.
  22. Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2009. "Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market," Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 925-957, March.
  23. Brian H. Boyer & Tomomi Kumagai & Kathy Yuan, 2006. "How Do Crises Spread? Evidence from Accessible and Inaccessible Stock Indices," Journal of Finance, American Finance Association, vol. 61(2), pages 957-1003, 04.
  24. Dirk G. Baur & Brian M. Lucey, 2007. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Institute for International Integration Studies Discussion Paper Series iiisdp198, IIIS.
  25. Connolly, Robert & Stivers, Chris & Sun, Licheng, 2005. "Stock Market Uncertainty and the Stock-Bond Return Relation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(01), pages 161-194, March.
  26. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:uts:wpaper:173. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Duncan Ford).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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