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Gueorgui I. Kolev
''Two gold return puzzles''
( 2013, Vol. 33 No.3 )
Since the dismantling of the Bretton Woods system, gold has delivered average return comparable to the average return delivered by the aggregate US stock market. This suggests that none of the growth and technological improvement gains accrued to the financiers. In the context of modern asset pricing models, say the CAPM model or the Fama-French three factor model, gold is a risk free asset, as it has no covariation with the risk factors. The large average gold return is a Jensen's alpha not explained by covariation with what modern asset pricing models consider risk factors, i.e., the market, the growth, and the small firms risk factors.
Keywords: Gold returns, Alternative investment, Aggregate stock market returns, Linear multi-factor asset pricing models, Quantitative easing
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
Manuscript Received : May 20 2013 Manuscript Accepted : Jul 11 2013

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