The Determinants of Stock Price Exposure: Financial Engineering and the Gold Mining Industry

Posted: 8 Aug 1998

See all articles by Peter Tufano

Peter Tufano

University of Oxford - Said Business School; National Bureau of Economic Research (NBER); University of Oxford - Said Business School

Abstract

This paper studies the exposure of North American gold mining firms to changes in the price of gold. While the average mining stock moves 2 percent for each 1 percent change in gold prices, exposures vary considerably over time and across firms. As predicted by valuation models, gold firm exposures are significantly negatively related to the firmis hedging and diversification activities, and to gold prices and gold return volatility, and are positively related to firm leverage. Simple discounted cash flow models produce useful beta predictions, but they systematically overestimate exposures possibly due to their failure to reflect managerial flexibility.

JEL Classification: G12

Suggested Citation

Tufano, Peter, The Determinants of Stock Price Exposure: Financial Engineering and the Gold Mining Industry. Journal of Finance, Vol. 53, No. 3, June 1998. Available at SSRN: https://ssrn.com/abstract=100317

Peter Tufano (Contact Author)

University of Oxford - Said Business School ( email )

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National Bureau of Economic Research (NBER)

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University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288551 (Phone)

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