The Destruction of a Safe Haven Asset?

19 Pages Posted: 7 Sep 2012  

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Kristoffer J. Glover

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

Date Written: August 31, 2012

Abstract

Gold has been a store of value for centuries and a safe haven for investors in the past decades. However, the increased investment in gold for speculative or hedging purposes has changed the safe haven property. We demonstrate theoretically and empirically that investor behavior has the potential to destroy the safe haven property of gold. The results suggest that an asset cannot be both an investment asset and an effective safe haven asset. This finding has important implications for financial stability since assets are more likely to exhibit excess comovement and volatility in the absence of a safe haven.

Keywords: safe haven, gold, investor behavior, funding constraints, contagion

JEL Classification: D03, D81, G01, G11

Suggested Citation

Baur, Dirk G. and Glover, Kristoffer J., The Destruction of a Safe Haven Asset? (August 31, 2012). Available at SSRN: https://ssrn.com/abstract=2142283 or http://dx.doi.org/10.2139/ssrn.2142283

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Kristoffer J. Glover

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

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