The Destruction of a Safe Haven Asset?
AbstractGold has been a store of value for centuries and a safe haven for investors in the past decades. However, the increased investment in gold for speculative or hedging purposes has changed the safe haven property. We demonstrate theoretically and empirically that investor behaviour has the potential to destroy the safe haven property of gold. The results suggest that an asset cannot be both an investment asset and an effective safe haven asset. This finding has important implications for financial stability since assets are more likely to exhibit excess comovement and volatility in the absence of a safe haven.
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Bibliographic InfoPaper provided by Finance Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 174.
Date of creation: 01 Sep 2012
Date of revision:
safe haven; gold; investor behaviour; funding constraints; contagion;
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G01 - Financial Economics - - General - - - Financial Crises
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-09 (All new papers)
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