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The gold price in times of crisis

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journal contribution
posted on 21.11.2014, 17:33 by J. Białkowski, M. T. Bohl, P. M. Stephan, Tomasz P. Wisniewski
Motivated by the recent gold price boom, this paper examines whether an asset bubble exists in the gold market. We approximate gold's fundamental value using several econometric models and apply a Markov regime-switching Augmented Dickey-Fuller (ADF) test which has substantial power for detecting explosive behavior. Although our results are sensitive to the specification of the fundamental value, we show that a model accounting for the current European sovereign debt crisis accurately tracks the gold price observed in the market. We also note that inflation in a general commodity price index and gold ETF demand have a potential to explain the price trajectory.

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Citation

International Review of Financial Analysis, 2014

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCE/School of Management

Version

AM (Accepted Manuscript)

Published in

International Review of Financial Analysis

Publisher

Elsevier

issn

1057-5219

Available date

21/11/2017

Publisher version

http://www.sciencedirect.com/science/article/pii/S1057521914000933

Language

en

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