Analysis of the Investment Potential and Inflation-Hedging Ability of Precious Metals

25 Pages Posted: 25 Jul 2007

See all articles by James Ross McCown

James Ross McCown

University of Oklahoma - Division of Finance; Toltec Group

John R. Zimmerman

Oklahoma City University

Date Written: July 23, 2007

Abstract

Gold and silver show strong evidence of ability to hedge stock portfolios and inflation during the period from 1970 to 2006. However, negative betas are only observed for the 1970s, suggesting that it is the inflation-hedging ability that is the cause of the stock-hedging ability. Both metals show high correlation with expected future inflation as measured by the TIPS spreads, confirming Greenspan's (1993) conjecture that gold prices are an indicator of expected inflation.

Keywords: gold, silver, inflation

JEL Classification: E31, G11

Suggested Citation

McCown, James Ross and Zimmerman, John R., Analysis of the Investment Potential and Inflation-Hedging Ability of Precious Metals (July 23, 2007). Available at SSRN: https://ssrn.com/abstract=1002966 or http://dx.doi.org/10.2139/ssrn.1002966

James Ross McCown (Contact Author)

University of Oklahoma - Division of Finance ( email )

Norman, OK 73019
United States

Toltec Group ( email )

Oklahoma City, OK
United States

John R. Zimmerman

Oklahoma City University ( email )

2501 North Blackwelder
Oklahoma City, OK 73106
United States

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