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

See all articles by Don Bredin

Don Bredin

University College Dublin (UCD) - Department of Banking & Finance

Thomas Conlon

University College Dublin

Valerio Potì

University College Dublin

Date Written: August 20, 2014

Abstract

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

Bredin, Don and Conlon, Thomas and Potì, Valerio, Does Gold Glitter in the Long-Run? Gold as a Hedge and Safe Haven Across Time and Investment Horizon (August 20, 2014). International Review of Financial Analysis, Vol. 41, 2015, Available at SSRN: https://ssrn.com/abstract=2483728 or http://dx.doi.org/10.2139/ssrn.2483728

Don Bredin

University College Dublin (UCD) - Department of Banking & Finance ( email )

School of Business
Blackrock, Co. Dublin, 4
Ireland

HOME PAGE: http://www.ucd.ie/bankingfinance/staff_bredin.html

Thomas Conlon (Contact Author)

University College Dublin ( email )

Smurfit Graduate Business School
Blackrock
Co. Dublin, n/a
Ireland

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/drthomasconlon/

Valerio Potì

University College Dublin ( email )

M. Smurfit School of Business
Carysfort Avenue, Blackrock
Dublin, Co Dublin
Ireland

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