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“The beauty of gold is, it loves bad news”: evidence from three major gold consumers


  • Niyati Bhanja


  • Arif Dar



In this paper we test the hedge and safe haven property of gold for multi-horizon stock market investors. Our methodological approach allows us to test these properties for investors with different investment horizons which has not been examined so far. To this end, we estimate the wavelet power and wavelet coherence to test the hedge and safe haven property. By using the wavelet coherence and cross wavelet phase angle we then asses the relationship between stock returns and returns in the gold market for both calm as well as turbulent periods. Our results indicate that the two assets are not correlated on average and mostly independent for both the calm as well as turbulent periods. It is therefore inferred that gold could be used as a weak hedge as well as a weak safe haven by the stock market investors. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Niyati Bhanja & Arif Dar, 2015. "“The beauty of gold is, it loves bad news”: evidence from three major gold consumers," Economic Change and Restructuring, Springer, vol. 48(3), pages 187-208, November.
  • Handle: RePEc:kap:ecopln:v:48:y:2015:i:3:p:187-208
    DOI: 10.1007/s10644-015-9160-z

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    References listed on IDEAS

    1. 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.
    2. Edoardo Gaffeo & Petya Garalova, 2014. "On the finance-growth nexus: additional evidence from Central and Eastern Europe countries," Economic Change and Restructuring, Springer, vol. 47(2), pages 89-115, May.
    3. Sjaastad, Larry A. & Scacciavillani, Fabio, 1996. "The price of gold and the exchange rate," Journal of International Money and Finance, Elsevier, vol. 15(6), pages 879-897, December.
    4. Baur, Dirk G. & McDermott, Thomas K., 2010. "Is gold a safe haven? International evidence," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1886-1898, August.
    5. Wang, Kuan-Min & Lee, Yuan-Ming & Thi, Thanh-Binh Nguyen, 2011. "Time and place where gold acts as an inflation hedge: An application of long-run and short-run threshold model," Economic Modelling, Elsevier, vol. 28(3), pages 806-819, May.
    6. Beckmann, Joscha & Czudaj, Robert, 2013. "Gold as an inflation hedge in a time-varying coefficient framework," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 208-222.
    7. Kumar Tiwari, Aviral & Billah Dar, Arif & Bhanja, Niyati & Shah, Aasif, 2013. "Stock Market Integration in Asian Countries: evidence from Wavelet multiple correlations," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 28, pages 441-456.
    8. Niyati Bhanja & Arif Billah Dar & Aviral Kumar Tiwari & Olaolu Richard Olayeni, 2012. "Are Stock Prices Hedge Against Inflation? A Revisit over Time and Frequencies in India," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 4(3), pages 199-213, September.
    9. Hood, Matthew & Malik, Farooq, 2013. "Is gold the best hedge and a safe haven under changing stock market volatility?," Review of Financial Economics, Elsevier, vol. 22(2), pages 47-52.
    10. Mahdavi, Saeid & Zhou, Su, 1997. "Gold and commodity prices as leading indicators of inflation: Tests of long-run relationship and predictive performance," Journal of Economics and Business, Elsevier, vol. 49(5), pages 475-489.
    11. Md Nain & Bandi Kamaiah, 2014. "Financial development and economic growth in India: some evidence from non-linear causality analysis," Economic Change and Restructuring, Springer, vol. 47(4), pages 299-319, November.
    12. 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.
    13. Reboredo, Juan C., 2013. "Is gold a hedge or safe haven against oil price movements?," Resources Policy, Elsevier, vol. 38(2), pages 130-137.
    14. Aviral Kumar Tiwari & Arif Billah Dar & Niyati Bhanja, 2014. "Inflation-Industrial Growth Nexus in India – A Revisit Through Continuous Wavelet Transform," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 14(2), pages 1-11.
    15. Tomáš Havránek & Roman Horváth & Jakub Matějů, 2012. "Monetary transmission and the financial sector in the Czech Republic," Economic Change and Restructuring, Springer, vol. 45(3), pages 135-155, August.
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    More about this item


    Gold; Stock prices; Muti-horizon investors; Hedge; Safe haven; G01; G15; C58;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics


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