Flight to Quality - Gold Mining Shares versus Gold Bullion

47 Pages Posted: 2 Dec 2019 Last revised: 7 Mar 2020

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Philipp Prange

Zeppelin University

Karsten Schweikert

University of Hohenheim

Date Written: November 17, 2019

Abstract

This paper uses the co-movement of gold mining shares with the price of gold to assess the strength of flight to quality by distinguishing between flight to physical gold and flight to gold mining company shares. The analysis of a global sample of gold mining companies reveals that flights to quality are very different across financial shocks with the bankruptcy of Lehman Brothers and the Brexit vote being the most extreme at opposite ends of the spectrum. We also find evidence that a flight from gold mining shares to gold leads to a stronger price reaction and thus to a stronger safe haven effect of gold bullion. The analysis demonstrates that gold mining companies can enrich our understanding of the flight to quality phenomenon.

Keywords: gold, safe haven, flight to quality, gold mining, financial shocks

JEL Classification: G01, G11, G14

Suggested Citation

Baur, Dirk G. and Prange, Philipp and Schweikert, Karsten, Flight to Quality - Gold Mining Shares versus Gold Bullion (November 17, 2019). Available at SSRN: https://ssrn.com/abstract=3488633 or http://dx.doi.org/10.2139/ssrn.3488633

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Philipp Prange

Zeppelin University ( email )

Am Seemooser Horn 20
Friedrichshafen, Lake Constance 88045
Germany

Karsten Schweikert

University of Hohenheim ( email )

Schloss 1C
Stuttgart, 70593
Germany

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