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Virginie Coudert and Hélène Raymond-Feingold
 
''Gold and financial assets: Are there any safe havens in bear markets?''
( 2011, Vol. 31 No.2 )
 
 
This paper looks into the role of gold as a safe haven or a hedge against stocks. We extend the existing literature in two ways. First, we consider crisis periods successively defined by recessions and bear markets. Second, we use a bivariate ARMA-GARCH-X model to estimate conditional covariances between gold and stocks returns. The regressions are run on monthly data for gold and several stock market indices (France, Germany, the UK, the US, the G7). We find that gold qualifies as a safe haven against all these stock indexes. This result holds for crises defined as recessions or bear markets, as the covariance between gold and stocks returns is found negative or null in all cases. Gold is also able to hedge against stock losses in most cases, although results are less clear-cut.
 
 
Keywords: gold, stocks, safe haven.
JEL: G1 - General Financial Markets: General (includes Measurement and Data)
F3 - International Finance: General
 
Manuscript Received : Apr 26 2011 Manuscript Accepted : Jun 05 2011

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