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The Risk Premium of Gold

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  • Nguyen, Duc Binh Benno
  • Prokopczuk, Marcel
  • Wese Simen, Chardin

Abstract

This paper examines the properties of the gold risk premium. We estimate a parsimonious model for the gold risk premium and uncover important time variations in the dynamics of the risk premium. We also estimate risk premia of the stock and bond markets, and investigate the role of gold as a hedge and safe haven asset from an ex-ante point of view. The results show that gold is not expected to serve as hedge and safe haven for the bond and stock markets, but it is so realized ex-post. Further, we find that gold is neither expected to be an inflation hedge nor is it realized.

Suggested Citation

  • Nguyen, Duc Binh Benno & Prokopczuk, Marcel & Wese Simen, Chardin, 2017. "The Risk Premium of Gold," Hannover Economic Papers (HEP) dp-616, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  • Handle: RePEc:han:dpaper:dp-616
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    References listed on IDEAS

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    Keywords

    Jump Risk; Tail Risk; Safe Haven; Hedge; Gold;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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