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The Destruction of a Safe Haven Asset?

Dirk Baur () and Kristoffer Glover

No 174, Working Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: Gold has been a store of value for centuries and a safe haven for investors in the past decades. However, the increased investment in gold for speculative or hedging purposes has changed the safe haven property. We demonstrate theoretically and empirically that investor behaviour has the potential to destroy the safe haven property of gold. The results suggest that an asset cannot be both an investment asset and an effective safe haven asset. This finding has important implications for financial stability since assets are more likely to exhibit excess comovement and volatility in the absence of a safe haven.

Keywords: safe haven; gold; investor behaviour; funding constraints; contagion (search for similar items in EconPapers)
JEL-codes: D03 D81 G01 G11 (search for similar items in EconPapers)
Date: 2012-09-01
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