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Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold

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  • Dirk G. Baur
  • Brian M. Lucey

Abstract

Is gold a hedge, defined as a security that is uncorrelated with stocks or bonds on average, or is it a safe haven, defined as a security that is uncorrelated with stocks and bonds in a market crash? We study constant and time-varying relations between U.S., U.K. and German stock and bond returns and gold returns to investigate gold as a hedge and a safe haven. We find that gold is a hedge against stocks on average and a safe haven in extreme stock market conditions. A portfolio analysis further shows that the safe haven property is short-lived. Copyright (c) 2010, The Eastern Finance Association.

Suggested Citation

  • 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.
  • Handle: RePEc:bla:finrev:v:45:y:2010:i:2:p:217-229
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    1. 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.
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    4. 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.
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    6. Christophe Faugere & Julian Van Erlach, 2004. "The Price of Gold: A Global Required Yield Theory," Finance 0403003, University Library of Munich, Germany.
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