Is the Price of Gold to Gold Mining Stocks Asymmetric?
17 Pages Posted: 28 Apr 2016 Last revised: 23 Oct 2016
Date Written: October 13, 2016
If an asymmetric relation exists between the prices of gold and gold mining stocks, then these firms possess real option characteristics, and therefore, a premium should be added to their valuation. This article examines this proposition, by firstly, using quantile regressions, which are ideally suited to examine asymmetries, and secondly, by accounting for endogenously determined structural breaks in the data. Our findings provide no support for an asymmetric relation. Furthermore, we also show that out-of-sample forecasting shows there is no causality from the gold price to the prices of those gold mining shares used in the sample.
Keywords: Asymmetric relation; Gold price; Gold Mining Firms; Real Options; Corporate Valuation
JEL Classification: G30, G31, O13
Suggested Citation: Suggested Citation