Does Gold Glitter in the Long-Run? Gold as a Hedge and Safe Haven Across Time and Investment Horizon
50 Pages Posted: 21 Aug 2014 Last revised: 31 Mar 2016
Date Written: August 20, 2014
During times of market turmoil, investors often seek to mitigate the risk associated with traditional investment assets such as equities and debt. The hedging, safe-haven and downside risk reduction properties of gold are examined in this paper for investors with short- and long-run horizons. Utilizing wavelet analysis, we find that gold acts as a short-run hedge for a variety of international equity and debt markets. The safe haven properties of gold during financial crises are further established, with gold shown to act as a safe haven for equity and debt investors across all horizons. Finally, gold is shown to reduce portfolio downside risk in the short-term but may actually contribute to increased long horizon downside risk during recessionary periods.
Keywords: Downside Risk, Gold, Hedge, Horizon, Safe Haven, Wavelet Analysis
JEL Classification: G00, G11, C32, C50
Suggested Citation: Suggested Citation