Bank Runs and Gold-Price Returns and Volatility: Evidence from Centuries of Data

Ruipeng Liu (), Christian Pierdzioch (), Rangan Gupta () and Elie Bouri ()
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Ruipeng Liu: Department of Finance, Deakin Business School, Deakin University, Melbourne, VIC 3125, Australia
Christian Pierdzioch: Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany
Rangan Gupta: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Elie Bouri: School of Business, Lebanese American University, Lebanon

No 202637, Working Papers from University of Pretoria, Department of Economics

Abstract: Gold is commonly viewed as a safe haven asset to which investors rush in times of economic and financial crises. It is attractive during a bank run because it is not a li- ability of any party and does not involve counterparty or bank credit risk. Thus, bank runs as a type of financial crisis should significantly affect the conditional return and volatility of gold prices. Surprisingly, the implications of bank runs for gold price dynamics have not been studied. Our empirical study addresses this gap. To this end, and using annual data going back to 1694, we estimate variants of GARCH models that account for time-varying conditional volatility, as well as time-varying higher-order moments (conditional skewness and conditional kurtosis). We find that accounting for bank runs improves the in-sample performance of the estimated GARCH models and also significantly leverages their out-of-sample performance in terms of standard statistical and economic criteria. We, thereby, establish that taking bank runs into account, as well as the dynamics of conditional higher-order moments, matters for the empirical modeling of the dynamics of the gold price and, thus, for the the safe-haven property of gold. In addition, we show that the higher-order GARCH models extended to include bank runs help investors to improve the statistical and the economic value of out-of-sample forecasts of gold-price returns and volatility.

Keywords: Gold; Safe haven; GARCH models; Higher-order moments; Forecasting (search for similar items in EconPapers)
JEL-codes: C22 C53 G01 G15 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2026-10
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