Metal Investments: Distrust Killer or Inflation Hedging?
Document Type
Article
Source of Publication
SSRN Electronic Journal
Publication Date
1-1-2011
Abstract
This study investigates long run metals properties using the extended version of Mccown and Zimmerman (2006) multifactor CAPM-model. By adding extra explanatory variables we improve the explanation power of the existing model in terms of R-squared. Taking German invertors' perspective and using prices of gold, silver and platinum over the period 1985-2010, our findings show that metals are true zero market beta assets. We further show that the determinants of metal prices are dependent on market conditions reflected by different betas for stable and crisis periods. The inclusion of a new variable, economic sentiment index in the models shows explanation power for gold. Its significant negative effect reveals gold position as a safe haven in times of distrust. Our results show that gold is the only metal co-integrated with the consumer price index (CPI) of Germany, thus the only metal providing inflation hedging to the German investor in the long run. Our results are consistent with the theories that metals provide long term hedge against unemployment.
DOI Link
ISSN
Publisher
Elsevier BV
Disciplines
Business
Recommended Citation
Rubbaniy, Ghulame; Lee, Ken Ting; and Verschoor, Willem F. C., "Metal Investments: Distrust Killer or Inflation Hedging?" (2011). All Works. 2380.
https://zuscholars.zu.ac.ae/works/2380
Indexed in Scopus
no
Open Access
no