The Correlation between the Gold Index and the Stock Market during Time of Crisis

• Main Authors: Jason Tiedemann, 高文彬
• Other Authors: Pei-Cheng Liao
• Format: Others
• Language: en_US
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/62651086015202757452

碩士 === 臺灣大學 === 企業管理碩士專班 === 98 === Heading into the first decade of an eventful twenty-first century, various catastrophic events such as epidemics, financial crisis, natural disasters, terrorist attacks and wars filled our memories. Living in an information era, any catastrophic events that caused any degree of turmoil throughout our daily lives will trigger global political and economical uncertainty or instability. These uncertainties and instabilities have lead investors into a constant search for a safe haven. Many believed gold is the safe haven that investors have been looking for, especially gold has been closely linked to economic and political instability by various scholars. As our world begins its long recovery from the global financial crisis, many believed that the U.S. dollar has lost its value. Especially since 1971, the U.S. dollar has lost almost 70 percent of its purchasing power, and therefore alternative currencies such as Euro and RMB have immerged, attempting to replace the U.S. dollar. Yet in recent years gold has been rising against all national currencies. Therefore, the purpose of this paper is to determine whether or not gold can be used as a safe haven in the long-run, especially during time of crisis. Thus the present research has chosen five types of catastrophes, which includes ten different catastrophic events that occurred from 2000 to 2009. These ten events are used to determine whether or not it has any significant relationship to the gold index. Out of forty-four regression tests have been conducted, of these ten events only the Indian Ocean Tsunami has long-run significant relationship to the gold index.