Abstract

http://ssrn.com/abstract=2004796
 
 

References (43)



 
 

Citations (2)



 


 



Financial Turmoil and Safe Haven Assets


Dirk G. Baur


University of Technology Sydney (UTS) - School of Finance and Economics; Financial Research Network (FIRN)

Thomas K. J. McDermott


London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment

May 13, 2013


Abstract:     
Financial crises and contagion have highlighted the need for safe haven assets. However, their existence, role and interactions are not well understood. We analyze the two most prominent yet fundamentally different safe haven assets, US government bonds and gold. Our econometric analysis explicitly models the dynamic interaction between these assets and the global stock market. While both assets appear to act as safe havens, we find that gold, in contrast to US government bonds, becomes increasingly sensitive to large negative shocks in the stock market. Gold therefore appears to be a stronger safe haven in extreme conditions despite the fact that it is more risky and less liquid than bonds. We offer a behavioral interpretation to explain our findings.

Number of Pages in PDF File: 34

Keywords: safe haven, safe assets, uncertainty, gold, US government bonds, Ellsberg decision rule, ambiguity-aversion, black swan event, contagion

JEL Classification: D03, D81, G01, G11

working papers series


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Date posted: February 14, 2012 ; Last revised: May 12, 2013

Suggested Citation

Baur, Dirk G. and McDermott, Thomas K. J., Financial Turmoil and Safe Haven Assets (May 13, 2013). Available at SSRN: http://ssrn.com/abstract=2004796 or http://dx.doi.org/10.2139/ssrn.2004796

Contact Information

Dirk G. Baur (Contact Author)
University of Technology Sydney (UTS) - School of Finance and Economics ( email )
Haymarket
Sydney, NSW 2007
Australia
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Thomas K. J. McDermott
London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment ( email )
Houghton Street
London, WC2A 2AE
Great Britain
Feedback to SSRN


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