The Risk Premium of Gold

63 Pages Posted: 22 Nov 2017 Last revised: 22 Mar 2019

See all articles by Duc Binh Benno Nguyen

Duc Binh Benno Nguyen

Leibniz Universität Hannover - Faculty of Economics and Management

Marcel Prokopczuk

Leibniz Universität Hannover - Faculty of Economics and Management; University of Reading - ICMA Centre

Chardin Wese Simen

University of Liverpool Management School

Date Written: November 20, 2017

Abstract

This paper examines the properties of the gold risk premium. We estimate a parsimonious model for the gold risk premium and uncover important time variations in the dynamics of the risk premium. We also estimate the risk premia of the stock and bond markets and investigate their co-movements. The results show that the co-movements of expected gold returns with expected returns of stocks and bonds are positive, while co-movements of realized returns are zero or negative on average. This results holds not only during normal market periods, but also in times of market stress. Furthermore, we find no significant co-movement of expected and realized returns of gold with inflation.

Keywords: Jump Risk, Tail Risk, Safe Haven, Hedge, Gold

JEL Classification: G01, G10, G11, Q02

Suggested Citation

Nguyen, Duc Binh Benno and Prokopczuk, Marcel and Wese Simen, Chardin, The Risk Premium of Gold (November 20, 2017). Journal of International Money and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3074549 or http://dx.doi.org/10.2139/ssrn.3074549

Duc Binh Benno Nguyen (Contact Author)

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

Marcel Prokopczuk

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chardin Wese Simen

University of Liverpool Management School ( email )

Management School
University of Liverpool
Liverpool, L69 7ZH
United Kingdom

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