Predicting the Equity Premium with the Demand for Gold Coins and Bars

15 Pages Posted: 5 Jun 2013 Last revised: 6 Feb 2015

See all articles by Dirk G. Baur

Dirk G. Baur

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

Gunter Löffler

Ulm University

Date Written: February 6, 2015

Abstract

In this paper, we propose novel predictor variables for forecasting stock market returns. We investigate the predictive power of the demand for gold coins and bars as a proxy for the risk premium consistent with the safe haven property of gold. The gold demand variables reflect the behaviour of retail investors and thus also represent a new class of predictors. Our analysis shows that the demand for gold is positively correlated with future stock returns and enhances the predictive power of the dividend yield and other variables.

Keywords: equity premium, stock returns, gold, gold coins, dividend yield, predictive regressions

JEL Classification: G12, G15

Suggested Citation

Baur, Dirk G. and Löffler, Gunter, Predicting the Equity Premium with the Demand for Gold Coins and Bars (February 6, 2015). FIRN Research Paper, Available at SSRN: https://ssrn.com/abstract=2274018 or http://dx.doi.org/10.2139/ssrn.2274018

Dirk G. Baur

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

Gunter Löffler (Contact Author)

Ulm University ( email )

Helmholzstrasse
Ulm, D-89081
Germany
+49 731 50 23598 (Phone)
+49 731 50 23950 (Fax)

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