The GOLD market as a safe haven against the stock market uncertainty: Evidence from geopolitical risk
Mohamed Bilel Triki and
Abderrazek Ben Maatoug
Resources Policy, 2021, vol. 70, issue C
The main purpose of this paper is to examine the relationship between the US stock market and the gold price in the presence of geopolitical tensions and conflicts by introducing the recent index calculated by Caldara and Iacoviello in 2016, namely the Geopolitical Risk Index. This study highlights the benefit of using gold in the role of hedging and diversifying investment portfolios. We consider the monthly gold price, the S&P500 index, and the Geopolitical Risk Index from January 1985 to December 2018. We employ an MV-GARCH model and dynamic copula to investigate the return link and volatility spillover between these two markets. The empirical results indicate that the S&P500 correlates less with gold during peaceful periods (i.e., a low GPR index) and more during periods characterized by extreme political events. This indicates that gold is a good diversifier and safe haven, particularly during great tension. We also find that the role of gold in hedging against S&P500 volatility is considerable, especially during highly tense periods.
Keywords: Geopolitical risk index; Gold price; Hedge ratio; Stock market; MV-GARCH; Dynamic copula (search for similar items in EconPapers)
JEL-codes: G1 G15 H56 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:70:y:2021:i:c:s030142072030903x
Access Statistics for this article
Resources Policy is currently edited by R. G. Eggert
More articles in Resources Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().