What Drives Gold Returns? A Decision Tree Analysis

14 Pages Posted: 2 Apr 2015

Date Written: March 30, 2015


The behavior of gold as an investment asset has been researched extensively. For the very long run, that is several decades, gold does not outperform equities. However, for shorter periods, gold responds to fears of inflation, stock market corrections, currency crises and financial instabilities very vigorously. In this paper we follow a decision tree methodology to investigate the behavior of gold prices using both traditional financial variables such as equity returns, equity volatility, oil prices, and the euro. We also use the new Cleveland Financial Stress Index to investigate its effectiveness in explaining changes in gold prices. We find that gold returns depend on different determinants across various regimes.

Keywords: Key words: Gold Prices, Uncertainty, Decision Tree Analysis, Financial Stress Index

JEL Classification: C88, D81, G17, G1

Suggested Citation

Malliaris, A. (Tassos) G. and Malliaris, Mary, What Drives Gold Returns? A Decision Tree Analysis (March 30, 2015). Available at SSRN: https://ssrn.com/abstract=2588151 or http://dx.doi.org/10.2139/ssrn.2588151

A. (Tassos) G. Malliaris (Contact Author)

Loyola University Chicago ( email )

16 E. Pearson Ave
Quinlan School of Business
Chicago, IL 60611
United States
312-915-6063 (Phone)

Mary Malliaris

Loyola University Chicago ( email )

16 East Pearson Street
Chicago, IL 60611
United States
312-915-7064 (Phone)

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