Safe Haven Assets and Investor Behaviour Under Uncertainty

Dirk Baur () and Thomas McDermott ()

The Institute for International Integration Studies Discussion Paper Series from IIIS

Abstract: We study two different safe haven assets, US government bonds and gold, and examine how the price changes of these assets can be used to infer investor behaviour under uncertainty. We find that investors are ambiguity-averse, that is they buy gold when faced with extreme uncertainty about the state of the economy or thefinancial system and when they receive ambiguous signals. In contrast, investors buyUS government bonds when faced with extreme but unambiguous signals. We also show that there is overreaction to ambiguous signals.

Keywords: uncertainty; financial crisis; safe haven; gold; bonds; Ellsberg decision rule; black swan event (search for similar items in EconPapers)
JEL-codes: D03 D81 G01 G11 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2011-09, Revised 2012-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Safe Haven Assets and Investor Behavior Under Uncertainty (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:iis:dispap:iiisdp392

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