The gold price in times of crisis

Białkowski, Jędrzej; Bohl, Martin T.; Stephan, Patrick M. and Wisniewski, Tomasz P. (2015). The gold price in times of crisis. International Review of Financial Analysis, 41 pp. 329–339.

DOI: https://doi.org/10.1016/j.irfa.2014.07.001

Abstract

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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About

• Item ORO ID
• 55378
• Item Type
• Journal Item
• ISSN
• 1057-5219
• Keywords
• gold price; speculative bubble; Markov regime-switching ADF test; global financial crisis; European sovereign debt crisis
• Academic Unit or School
• Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
  Faculty of Business and Law (FBL) > Business
  Faculty of Business and Law (FBL)
• Copyright Holders
• © 2014 Elsevier Inc.
• Related URLs
• • https://lra.le.ac.uk/handle/2381/29288(Other)
• Depositing User
• Tomasz Wisniewski