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Hedging and safe-haven characteristics of Gold against currencies: An investigation based on multivariate dynamic copula theory

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  • Nguyen, Quynh Nga
  • Bedoui, Rihab
  • Majdoub, Najemeddine
  • Guesmi, Khaled
  • Chevallier, Julien

Abstract

The copula concept presents a powerful and flexible tool for studying and modeling multivariate distribution. The most popular copulas are the Archimedean and elliptical copula used to analyze the dependence distribution. In this article, we assess the capacity of Gold to be a hedge or a safe-haven against the depreciation value of USD, EUR, and JPY on average and during extreme movement using the copula theory. We then examine the dependence structure between Gold and exchange rates during the sub-prime crisis and the dramatic increase in the USD value. Empirical results suggest that Gold is an effective and robust hedge against the depreciation value of the currencies. A noteworthy finding, we find that Gold is a stabilizing asset with substantial safe-haven property in turmoil and high uncertainty periods.

Suggested Citation

  • Nguyen, Quynh Nga & Bedoui, Rihab & Majdoub, Najemeddine & Guesmi, Khaled & Chevallier, Julien, 2020. "Hedging and safe-haven characteristics of Gold against currencies: An investigation based on multivariate dynamic copula theory," Resources Policy, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:jrpoli:v:68:y:2020:i:c:s0301420719304921
    DOI: 10.1016/j.resourpol.2020.101766
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    More about this item

    Keywords

    Copula; Gold; Effective exchange rates; Safe-haven; Hedging;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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