 Is gold still a safe haven for stock markets? New insights through the tail thickness of portfolio return distributionsKrzysztof Echaust and Małgorzata Just Research in International Business and Finance, 2022, vol. 63, issue C Abstract: This study examines the safe-haven property of gold during two deep financial crashes: the global financial crisis (GFC) and the coronavirus disease 2019 (COVID-19) pandemic. Applying extreme value theory, we analyze the tail behavior of the returns of 46 stock indices sorted by geographic location and level of market development and then investigate these portfolios with various gold allocations. We focus on changes in the tail thickness of the portfolio return distribution as an effect of an increased gold allocation. The COVID-19 crisis exhibited heavier lower tails of the stock indices than the GFC. During the GFC, gold enabled heavy Fréchet-type tails to change into thin Gumbel-type tails, whereas during the COVID-19 crash, the tails remained heavy, even after hedging. Thus, gold acted as a safe-haven asset, significantly decreasing extreme downside risk during the GFC, but the same result cannot be confirmed for the COVID-19 pandemic. Keywords: Safe-haven asset; Fat tails; Global financial crisis (GFC); Coronavirus disease 2019 (COVID-19); Block maxima method (BMM); Extreme value theory (EVT) (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:63:y:2022:i:c:s027553192200174x DOI: 10.1016/j.ribaf.2022.101788 Access Statistics for this article Research in International Business and Finance is currently edited by T. Lagoarde Segot More articles in Research in International Business and Finance from Elsevier |
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