ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

Gold Investments in Malaysia

Mohd Fahmi Ghazalia,b, Hooi Hooi Leanb*, Zakaria Bahariab
a
Labuan Faculty of International Finance, Universiti Malaysia Sabah, Labuan,
Malaysia
b
Economics Program, School of Social Sciences, Universiti Sains Malaysia, Penang,
Malaysia
* Corresponding Author: hooilean@usm.my; learnmy@gmail.com

ABSTRACT

This paper analyzes the characteristics of gold for its role as a diversifier, a hedge or a
safe haven against stock under different economic climates. We find a strong hedging
role for local gold. Local gold also tends to be a weak safe haven against the stock
market. On the other hand, international gold only shows weak hedge feature.
However, international gold, in particular gold denominated in the UK pound, can act
as a strong safe haven during extreme movements in stock return. The strength of the
safe haven characteristic varies across market conditions. We conclude that different
currency denominations and different types of gold are important in determining the
hedge and safe haven effects.

Keyword: Gold, Hedge, Safe haven, Stock, Output growth, Inflation.

1. Introduction
The investigation of gold as a diversifier, hedge and safe haven is relatively scarce,
particularly in small developing countries. Most of the previous studies investigate
this matter either in developed markets or large emerging markets, such as BRICs
countries (Baur & Lucey, 2010; Baur & McDermott, 2010, 2013; Coudert &
Raymond-Feingold, 2011; Dicle, Levendis, & Alqotob, 2011; Miyazaki & Hamori,
2013).

Many studies tend to focus on the ability of gold as a safe haven against extreme stock
market shocks (Ciner, Gurdgiev, & Lucey, 2013; Ghazali, Lean, & Bahari, 2013;
Ibrahim, 2012; Ibrahim & Baharom, 2011). Far too little attention has been paid to the
ability of gold as a safe haven against stock markets during extreme falls in output
growth, or during extreme inflation conditions. To the best of our knowledge, this
could be the first study in this context to compare the characteristics of gold in these
three independent conditions. Therefore, to address this issue, we use large shocks as
a trigger of safe haven purchases, since massive shocks carry more information, and
cause different reactions by investors if compared to small and normal shocks.1 The
results are significant, as in reality, investors would be interested in knowing how
gold performs as a safe haven against stocks during periods in which their real
livelihood income could be at risk. The findings are also imperative, since extreme

1
Peng, Xiong, and Bollerslev (2007) argue that investors can only process a limited amount of
information during a given time period. This ‘limited attention’ may result in different reactions of
investors to large shocks than to small shocks.

1
87
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

changes in the coincident indicator and lagging indicator give the ability to confirm
that the pattern is occurring, or is about to occur.

The recent and continuing financial crisis, ongoing inflation and the strength of the
price of gold, present a strong motivation to empirically test the ability of gold as a
diversifier, a hedge or a safe haven from losses during times of financial and
economic turmoil. This is because gold is said to be uncorrelated with other types of
assets which are an essential feature in the era of globalization in which correlations
increase dramatically among most asset types. Furthermore, to date, the work that
addresses this issue suffers from shortcomings mainly attributable to the
responsiveness of the financial market, and therefore offers a scope for potential
improvement.

With the exception of Baur (2012), and Baur and McDermott (2010), we are unaware
of any prior researches that examine the association between gold and stock in
different currency denominations, different durations of shock, and different types of
gold. Individual and institutional investors’ reactions to varying degrees of the
financial meltdown in terms of severity and duration of shocks to the financial system
are critical, since, if gold is a safe haven asset, it can be considered ‘panic buy’ in the
immediate aftermath of an extreme negative market shock. On the other hand,
different currency denominations and types of gold are important, since these help the
investors to decide the best preference for gold investment. This research attempts to
investigate how the mentioned differences yield different returns, and influence the
magnitude and size of the safe haven effect. More specifically, for investors, the
difference in the magnitude of parameters among the different types of gold is
important in valuing investment decisions.

2. A Brief Review of the Related Literature

This section contains the previous studies comprising a related literature review on
gold in the diversification of portfolios, gold as a hedge and gold as a safe haven
against stock.

2.1 Gold as a Diversifier Asset

Due to the difference between gold price determinant and other financial assets price
determinant, gold has always been considered a portfolio diversifier, especially with
stocks portfolio (Hoang, 2011). Using London gold price quoted in the US dollar,
most prior studies argue that gold can be a good asset for portfolio diversification in
an American portfolio, because it reduces risk, and increases return (Chua, Sick, &
Woodward, 1990; Michaud, Michaud, & Pulvermacher, 2006; Ratner & Klein, 2008;
Sherman, 1982).

Among the first systematic studies of gold in portfolio allocation is reported by

McDonald and Solnick (1977). They find that the relationship between gold and gold
mining stocks with S&P 500 is insignificant. Hence, the inclusion of gold quoted in
London in an American portfolio allows reducing its risk and increasing its return.

The study of McDonald and Solnick (1977) is advocated by other major studies such
as Chua et al. (1990) and Jaffe (1989). Chua et al. (1990) demonstrate that a portfolio
with a 25% weight of gold reduces the portfolio risk and increases its return. They

2
88
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

also indicate that physical gold is more efficient in portfolio diversification than paper
gold. Nevertheless, the correlation of gold returns with the US stock returns is rising
over time, lowering the benefits of holding gold. Jaffe (1989) also reveals that
physical gold is a more efficient portfolio diversifier compared to paper gold, since
physical gold has weaker correlations with stocks (S&P 500) and bonds, as well as a
weaker beta.

Several examples of studies also reveal the importance of physical gold in portfolio
diversification (Hillier, Draper, & Faff, 2006; Michaud et al., 2006; Ratner & Klein,
2008; Sherman, 1982; Wozniak, 2008). Michaud et al. (2006) analyze American stock
and London gold prices, and show that, for the portfolios of weak risk, the proportion
of gold to be included is between 1% and 2%; while for portfolios of higher risk, this
proportion is between 2% and 4%. Sherman (1982) finds that gold has a low beta and
a positive alpha in the capital asset pricing model, as well as weak correlations with
stocks and bonds. In 2008, Ratner and Klein demonstrated that gold plays a
significant role in the international portfolio diversification. They conclude that gold,
as a stand-alone investment, is a relatively poor investment compared with the US
stock market over the long-term. Hillier et al. (2006) also find weak correlations, or
even negative ones, between precious metals (gold, silver, platinum, etc.) and S&P
500. In measuring portfolio efficiency, they find that the performance is better for the
portfolios that include at least one of the three precious metals. Wozniak (2008), on
the other hand, also finds the same results after applying the concept of Michaud et al.
(2006) to English portfolios.

Some studies attempt to explain the issue in more countries, such as Coudert and
Raymond-Feingold (2011), Lucey, Tully, and Poti (2006), and Smith (2002). Lucey et
al. (2006) find an optimal weight of between 6% to 25%, depending on the time
period and the other (mainly equity) assets included. Viewing the issue from the
short-run and the long-run perspectives, Smith (2002) concludes that gold is favorable
in portfolio diversification for markets in Europe and Japan. Coudert and Raymond-
Feingold (2011), on the other hand, find that physical gold is an attractive asset to
diversify a portfolio away from stocks, especially in times of bear markets in G-7
countries.

Although the importance of physical gold is advocated, recent studies find a

significant role of gold stock in portfolio diversification. Conover, Jensen, and
Johnson (2009) suggest that the inclusion of 25% precious metal mining stocks in a
portfolio increases its performance. Looking from a different perspective, Pullen,
Benson, and Faff (2014) reveal that gold mutual fund, gold stock and gold exchange-
traded funds (ETFs) exhibit diversification qualities, but not gold bullion. Barisheff
(2006), on the other hand, demonstrates that the Spot Precious Metal Index is
negatively correlated with some American and international stock indices.

While there is substantial empirical evidence in developed markets regarding the

relationship between gold returns and stock returns from the portfolio diversification
viewpoint, studies on this issue have rarely been tested in the literature, and remain
unclear, particularly in developing markets, and using data quoted in a currency other
than that of the UK or of the US. Do, Mcaleer, and Sriboonchitta (2009) find that gold
works as a substitute for stocks in the Philippines and Vietnam, while it serves as a
complement for stocks in Indonesia, Malaysia, and Thailand. Hoang (2011) finds that

3
89
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

physical gold and paper gold can be favorable in the diversification of French
portfolios. Nevertheless, physical gold is more supportive in stock portfolios, while
paper gold is more efficient in bond portfolios. For portfolio performance, the
increase in performance is more important with ingots than with Napoleon coins,
probably due to the higher risk of Napoleon coins in comparison with ingots. Using
the non-parametric stochastic dominance method, Hoang, Lean, and Wong (2015)
find that stock portfolios including gold stochastically dominate those without gold at
the second and third order. In contrast to Hoang (2011), this study shows that ingots
and Napoleon coins yield similar results. In another major study, Vandeloise and
Wael (1990) also find that the correlations of gold quoted in Belgium (ingot and old-
sovereign coin) with Belgian stocks and bonds are either zero or negative. On the
other hand, a recent study by Mensi, Hammoudeh, Reboredo, and Nguyen (2015) find
that the portfolios with gold outperform their portfolio counterparts that do not
include gold in all Gulf Cooperation Council (GCC) stock markets.

Studies on whether gold can serve as a diversification asset in Malaysia have recently
been reported by Ibrahim (2012), and Ibrahim and Baharom (2011). Ibrahim and
Baharom (2011) reveal that gold only acts as a diversification role, and diversification
seems to become weaker during extreme stock market conditions. Ibrahim (2012) also
finds a significant positive relation between gold return and once-lagged stock return;
hence, supports the diversification properties of gold. The relation has not
strengthened during consecutive days of market declines.

2.2 Gold as a Hedge against Stock

An early study that investigates this issue on US data is Blose (1996). He finds that
investors wishing to make use of gold returns to hedge a portfolio or to speculate on
the price of gold can achieve the same objective by using gold mutual funds.

The result of Blose (1996) is supported by Baur and McDermott (2013), Bredin,
Conlon, and Potì (2015), Choudhry, Hassan, and Shabi (2015). Baur and McDermott
(2013) find that US government bonds are a stronger hedge against stock market
turmoil, on average, than gold. They show that gold is a hedge against both stock
market losses and bond market losses, and the response of gold to market shock is
quickly reversed or short-lived. The result also shows that investors generally use
bonds to hedge against stock market losses. Nonetheless, if both stocks and bonds
exhibit losses, investors buy gold. Utilizing wavelet analysis, Bredin et al. (2015)
reveal that gold acts as a hedge for equity and debt markets in the US, the UK, and
Germany, for horizons of up to one year. Choudhry et al. (2015) analyze the bivariate
and multivariate non-linear Granger causality in the US, the UK, and Japan and find
that gold can serve as a hedge against stock market returns and volatility in stable
financial conditions.

Other studies generally yield mixed evidence in their analyses. Pullen et al. (2014)
document a clear and strong hedging role for gold bullion in the US, but not for gold
mutual funds, gold stocks, and gold ETFs. Baur and Lucey (2010) find that gold is a
hedge instrument for stocks in the US and the UK, but not in Germany, and that it is a
hedge for bonds in Germany, but not in the US and the UK. Gold also is a stronger
hedge for stocks in bear markets compared to bull markets. Nevertheless, applying the
same method, but being more rigid in the analysis, Ciner et al. (2013) demonstrate
that gold acts as a hedge against bond in the US and the UK. Concerning stock, they

4
90
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

find that gold is a hedge asset in the US, but is not in the UK. Baur and McDermott
(2010) report that gold serves as a hedge against movements in the respective
domestic stock markets in France, Germany, Italy, Switzerland, the UK, and the US,
but not in the BRICs, Australia, Canada and Japan. Following the procedure of Baur
and McDermott (2010), Gürgün and Ünalmış (2014) further indicate that gold works
as a hedge in most financial markets for domestic investors. They also find mixed
results for major gold-producing countries. This is attributable to the relatively small
size of gold-producing companies in the stock markets of these countries. Mensi et al.
(2015), on the other hand, show that gold can serve as a hedge for the GCC countries
with the exception of the United Arab Emirates (UAE) and Saudi Arabia.

The mixed results are in line with those by Ghazali et al. (2013), and Ibrahim and
Baharom (2011) in Malaysia. Ibrahim and Baharom (2011) find that gold only
provides a hedge against the stock market in the first sub-sample (2001-2005), but not
in the full sample and the second sub-sample (2005-2010). In contrast, Ghazali et al.
(2013) analyze the issue in more recent data, and suggest that the reaction of gold to
shocks is consistent with a hedge. Nevertheless, the feature is short-lived, since the
initial effect is reversed within one or two days.

A recent study by Miyazaki and Hamori (2013) demonstrate that gold is not
considered a hedge for stocks in the long-run. Nevertheless, gold is a hedge against
S&P 500 after the actualization of the subprime mortgage problem, as well as before
and after the Lehman Brothers’ bankruptcy. This study supports the common view of
flight-to-quality, and findings of some previous works, particularly those suggesting
that gold not always act as a hedge for stocks.

2.3 Gold as a Safe Haven against Stock

Hillier et al. (2006) were among the first to highlight the relationship between gold
and stock during periods of high market risk. They show that precious metals are
more negatively related to stock market returns during periods of abnormally high
stock market volatility in the US. Nevertheless, Hillier et al. (2006) make no attempt
to differentiate between various types of market conditions.

Serious discussions and analyses of this issue were demonstrated by Baur and Lucey
(2010), and Baur and McDermott (2010) 2 where they take the concept of a
discontinuous relation between gold bullion and financial assets. Baur and Lucey
(2010) imply that gold only serves as a safe haven against Morgan Stanley Capital
International (MSCI) stock in extreme adverse stock market conditions in the US, the
UK, and Germany. However, gold is generally not a safe haven for bonds in any
market. The results also show that purchasing gold after an extreme stock market
shock yields positive gold returns in the US. Additionally, functions of gold as a safe
haven are only short-lived, where investors who hold gold more than 15 trading days
after negative shock will lose money. Baur and McDermott (2010) extend the analysis
of Baur and Lucey (2010) where they report that gold is a safe haven for all European
markets and the US, but not for the BRICs, Australia, Canada and Japan. They
discover that gold is a safe haven during periods of high volatility in the stock market,
but not during extreme returns uncertainty. Gold is evidenced to have a strong safe

2
Baur and Lucey (2010) and Baur and McDermott (2010) also document findings relevant to
understanding the hedging properties of gold.

5
91
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

haven for markets in the US and Canada during the 1987 stock market crash, and also
a strong safe haven against losses on European and US stocks during the crisis of
October, 2008. The results for the Asian crisis do not clearly indicate a safe haven
effect of gold for any of the markets tested. Analysis of the role of exchange rate
effects also shows that a common currency denomination (the US dollar) of both
stock and gold generally increases the co-movement in all market conditions, thus
eliminating or reducing the safe haven feature of gold.

Coudert and Raymond-Feingold (2011) also demonstrate that gold qualifies as a safe
haven against stock indices of France, Germany, the US, the UK and the G-7. More
precisely, gold is a weak safe haven in most cases, as its correlations with stocks are
not significantly different from zero during times of crises. Although the results are
quite convincing, one major drawback of this study is that the authors only use low
frequency data (monthly); it only shows a gradual trend in stock markets, but is
unable to capture whether gold is a ‘panic buy’ in the immediate aftermath of an
extreme negative market shock.

Ciner et al. (2013) generally find that gold does not act as a safe haven during market
turmoil for stocks in the US and the UK. They mention an increase in the popularity
of gold as an investment vehicle, and possibly the rise of financial instrumentation
relating to gold, causing a decline in its primary attraction for many financial market
participants, which is the notion that gold can be trusted as a safe haven against equity
market volatility. Nevertheless, Ciner et al. (2013) find that gold acts as a safe haven
in the US after 1990, which is presumably related to the first Gulf War, and recently
after the 2007-2009 credit crunch. On the other hand, gold cannot be considered a safe
haven for the UK stock during these equity market turmoil periods. Miyazaki and
Hamori (2013) also show that gold does not always act as a hedge or a safe haven for
stocks in the US. Utilizes a wavelet approach, a recent study by Bredin et al. (2015)
suggest that, contrary to the 15 days findings of Baur and Lucey (2010), gold serves
as a safe haven for long-run horizons of up to one year. Nevertheless, during the
economic contractions of the early 1980s, gold was found not to work as a safe haven.

Choudhry et al. (2015) further investigate bi-directional non-linear dynamic co-

movements, allowing for a feedback effect among gold returns, stock returns and
stock volatility in the US, the UK and Japan during crises periods. Based on the
bivariate and multivariate tests, they find that gold may not perform well as a safe
haven during the financial crisis period.

Recent studies attempt to stress the importance of gold mutual funds, gold stocks and
gold ETFs during the stock market slump. Pullen et al. (2014) show that investors
who are keen to secure safe haven characteristics of gold investment cannot generally
rely on gold stocks or mutual funds, but instead need to take positions directly in
bullion or gold ETFs.

The serious debate of this issue in emerging and newly developing financial markets
is demonstrated by Gürgün and Ünalmış (2014). They report two meaningful results.
First, the number of countries in which gold displays safe haven characteristics are
higher when the returns for gold and equities are in the domestic currency. This is
mainly due to the fact that, in emerging and developing countries, a depreciation of
the domestic currency is generally associated with a decline in equity prices, and vice

6
92
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

versa. When equity prices are denominated in US dollar, they find a strong co-
movement between equity and gold returns in most countries. Second, the severity of
the decline in equity prices matters for the demand of safe haven assets. On the other
hand, Mensi et al. (2015) reveal that the Islamic equity index works as a better safe
haven than gold for all the GCC stock markets.

In the context of Malaysia, studies in this area were conducted by Ghazali et al. (2013)
and Ibrahim and Baharom (2011). Ibrahim and Baharom (2011) only find safe haven
feature of gold during extreme stock market downturns from August, 2001 until
November, 2005. Nonetheless, the characteristics tend to disappear during the second
sub-period (December, 2005-March, 2010). Ghazali et al. (2013) find that gold only
serves as a safe haven at the 5% threshold, while for more extreme returns, stock and
gold move in tandem if the stock falls, establishing a market of one. They also find
little evidence that gold is a safe haven asset after extreme stock market shocks, and
during specific crisis periods. Ghazali, Lean, and Bahari (2015) build on the work of
Ghazali et al. (2013) by extending the analysis using gold investment account that
complies with Sharia principles, and comparing the findings with gold bullion. They
find that the local gold, in particular, the Islamic gold account does not perform
attractively as a safe haven during the episodes of extreme drops in Malaysian stock
market. Nevertheless, the official gold standard performs better than the gold account.

3. Data and Methodology

This section contains the data set and the econometric models used to analyze the
diversifier, hedge and safe haven features of gold.

3.1 Data
The sample period is from February 10, 2010 to August 29, 2014 to accommodate the
gold account. For local gold, we use daily prices of Kijang Emas and Kuwait Finance
House (KFH) Gold Account-i, which are denominated in Malaysian Ringgit. The
international gold is based on P.M. fixing of London gold prices, denominated in US
dollar and UK pound. The London gold fixing is the spot price of gold, and the
trading time of the gold market (local time) is from 8:30 A.M. to 4:00 P.M. The
market price of gold is determined twice (at 10:30 A.M. and at 3:00 P.M.) on a
business days, and is considered a worldwide benchmark for various gold prices. At
the 3:00 P.M. fixing, all markets in Malaysia are closed. Therefore, this is a reference
for the Malaysian market on the following trading day. When the P.M. fixing price is
not available, we replace the data with the next opening day’s A.M. fixing price.3

3
The inclusion of the US and the UK is self-evident, being large capital markets that also have
significant roles in the gold market (Baur & Lucey, 2010). In May, 2013, the US held the largest
official gold reserve, where the Federal Reserve continues to hold 8,133.5 tons of gold, or a 75.6%
share in gold of total foreign reserves (Source: World Gold Council). The US is also among the main
players in mining gold (Chossudovsky, 2013). In 2012, the US produced 230 tons of gold, making
them the third-largest gold-producing country, behind China and Australia (Source: U.S. Geological
Survey, Mineral Commodity Summaries). The UK, on the other hand, plays a significant role in the
global market as an intermediary gold trader, and has a strong demand of gold for financial purposes
(Collins, 2011). Unlike the US and the UK, Malaysia does not have a significant role in the gold
trading market. Nevertheless, Malaysia is chosen due to the deep interest in gold shown by Malaysian
policy makers and academicians in the face of the 1997-1998 Asian financial crisis, as it is seen as a
stable and profitable tool for successful investments. The recent financial and debt crises, and the
attendant strength of the gold price, also lead to profound interest in this precious metal in Malaysia.

7
93
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

In an attempt to investigate how the differences in gold yield different results, this
study employs different types of gold (gold bullion coin and gold account). Data of
gold bullion coin (Kijang Emas) were collected from the Central Bank of Malaysia,
while the data of the worldwide benchmark of gold were collected from the London
Bullion Market Association, the largest gold market in the world. While, for a gold
account that complies with Sharia principles, we use prices of KFH Gold Account-i
per gram (in Malaysian Ringgit), gathered from the KFH website.4 5

The data for stock consist of daily prices of Kuala Lumpur Composite Index (KLCI),
is extracted from the Datastream. KLCI is a key benchmark index used in Bursa
Malaysia. The consumer price index (CPI) (in 2000 base index) is monthly, and is
denominated in local currency (i.e., Malaysian Ringgit). CPI is used as a proxy for
inflation. The industrial production index (IPI) (in 2000 base index) is used as a proxy
for output growth. Both data are taken from International Financial Statistics.

3.2 Econometric Model

We expect that the decision of investors to buy gold depends on economic and
financial uncertainty. In the first step, this study analyzes how gold reacts to shocks in
the stock market, on average (i.e., systematic analysis). The findings provide evidence
for a diversifier or a hedge. In the second step, we examine the reaction of gold to
shocks under extreme conditions, (i.e., conditional analysis) to find the existence of a
safe haven characteristic.

3.2.1 Systematic Analysis

In the analysis of the gold-stock relationship, we adopt the market model (Faff &
Chan, 1998) combined with the autoregressive distributed lag (ARDL) model used by
Capie, Mills, and Wood (2005).

(1.1)

(1.2)

(1.3)

where denotes gold return at time t. The contemporaneous and lagged stock
market shocks are captured by . The error term or innovation follows a
threshold-asymmetric generalized autoregressive conditional heteroscedasticity
(TGARCH) or a generalized autoregressive conditional heteroscedasticity (GARCH)
process. The time-varying conditional variance of the regression residuals based on
the TGARCH or the GARCH specifications are represented in Equations (1.2) and
(1.3), respectively.

The parameters to be estimated are , and . The lag lengths k and l are included
to capture the evolution of the gold return through time. The parameter tests

4
http://www.kfh.com.my/kfhmb/.
5
Kuwait Finance House (Malaysia) Berhad (KFHMB), the first foreign Islamic bank in the country,
has launched the KFH Gold Account-i on February 9th, 2010 to enable customers to purchase and
invest in gold in a convenient and secure way, without having to keep the gold physically.

8
94
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

whether gold is a diversifier asset or a hedge asset for stock. Gold investment asset is
deemed a diversifier if is statistically significant and positive, and less than unity.
Conversely, a gold investment asset is characterized as a weak (strong) hedge for
stock if is non-positive (negative) and statistically insignificant (significant), since
the assets are uncorrelated (negatively correlated) with each other, on average.

3.2.2 Conditional Analysis

To analyze the safe haven property of gold, we assume that the relationships are not
constant, but are rather influenced by extreme market and economic conditions.
Rather than attempting to define the extreme periods in an ad-hoc manner, we instead
allow the data ‘speak for itself’. We examine the behavior of gold returns during large
and unlikely events by employing the quantile regressions method. Specifically, this
study examines the reaction of gold to shocks under extreme conditions individually,
as suggested by Baur and McDermott (2013).6

3.2.2.1 The Relationship between Gold Returns and Stock Return Conditional on
the Extreme Stock Market Shocks
The analysis is based on the model utilized for the systematic analysis, but only uses
observations on periods when the financial market conditions exceed certain
thresholds, that is, 10%, 5%, 2.5%, and 1% quantiles, respectively, as follows:

(2.1)

(2.2)

where denotes gold return at time t and the error term is given by . The term
accounts for extreme stock return movement. It is included in order to
focus on the case of a falling stock market. If parameter is statistically significant,
there is evidence of a non-linear relationship between gold returns and the stock return,
implying that investors act differently in extreme market conditions compared to
normal conditions.

Specifically, to obtain the extreme values of stock returns, we estimate the threshold
values of stock returns via quantile regression, as in Equation (2.1). Then, we analyze
the role of gold in times of stock market stress implicitly by including regressors that
contain stock returns in the q% lower quantiles (10%, 5%, 2.5%, and 1%), as shown
in Equation (2.2).7 If the stock market returns exceed a certain (lower tail) threshold,
given by the q%, the dummy variable, (….), is one, and zero otherwise.

The parameter verifies whether gold is a safe haven asset for stock. If in an
extremely falling stock market are non-positive (negative) and statistically

6
Baur and McDermott (2010), Ciner et al. (2013) and Hood and Malik (2013) examine the time-
varying behavior of gold with respect to stock markets by presenting coefficient estimates of a rolling
window regression of the gold return on the portfolio index, while Baur and Lucey (2010), Ghazali et
al. (2013) and Ibrahim and Baharom (2011) estimate simultaneous conditional regression of gold return
on the stock index account for asymmetries of extreme negative shocks in stock market.
7
The severity of the shock is taken into account by looking at a range of lower quantiles of stock
returns. The choice of quantiles is arbitrary, to some degree. Nevertheless, these quantiles have also
been analyzed in prior studies, such as Bae, Karolyi, and Stulz (2003), and Baur and McDermott (2010).

9
95
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

insignificant (significant), gold serves as a weak (strong) safe haven asset for stock,
since they are uncorrelated (negatively correlated) with each other.

3.2.2.2 The Relationship between Gold Returns and Stock Return Conditional on
the Extreme Movements in Output Growth
In this model, we include regressors that contain output growth in extreme conditions.
The regressions model to analyze the safe haven property of gold during recession is
as follows:

(3.1)

(3.2)
To obtain the extreme values of output growth, we estimate the threshold values of
output growth via quantile regression, as in Equation (3.1), where the term
accounts for falling output growth movements. The dummy variables denoted as
(….) in Equation (3.2) capture extreme declines in output growth, and are
equal to one if the output growth crosses a certain (lower tail) threshold given by the
10%, 5%, 2.5%, and 1% quantiles of the distribution, and zero otherwise. Then, the
output growth dummy variables are multiplied by the stock returns to make a new
variable called an interaction term .

The parameter verifies whether gold is a safe haven asset for stock. If in
extremely falling output growth is non-positive (negative) and statistically
insignificant (significant), gold works as a weak (strong) safe haven asset for stock
during economic contraction, as they are uncorrelated (negatively correlated) with
each other.

3.2.2.3 The Relationship between Gold Returns and Stock Return Conditional on
the Extreme Inflation Shocks
This analysis examines the role of gold as a safe haven against stock market during
periods of rising inflation. The regressions model to analyze the safe haven property
of gold during this period is as follows:

(4.1)

(4.2)

To obtain the extreme values of inflation, this study estimates the threshold values of
inflation via quantile regression, as in Equation (4.1), where the term accounts
for rising inflation.

The interaction term is captured by multiplying the inflation dummy variables and the
stock returns, , as in Equation (4.2). More specifically, we analyze the
safe haven of gold against stock return in times of rising in inflation by including the
regressors that contain inflation in the q% upper quantiles (90%, 95%, 97.5%, and
99%). If the inflation exceeds a certain (upper tail) threshold, given by the q%, the
value of dummy variable, (….), is one, and zero otherwise.

10
96
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

The parameter verifies whether gold is a safe haven asset for stock. If the in
extremely rising inflation is non-positive and statistically insignificant, gold acts as a
weak safe haven against stock during periods of rising inflation, since they are
uncorrelated (coefficient is zero) with each other. If the parameters are negative and
statistically significant, gold functions as a strong safe haven for the market under
study.

4. Empirical Results
4.1 Descriptive Statistics
Table 1 presents the descriptive statistics of gold returns in Malaysian Ringgit (Kijang
Emas and Gold Account-i), gold return in the US dollar, gold return in the British
pound and Malaysian stock market index return from 2010 to 2014.

The table shows that the KLCI return significantly outperforms gold returns. On the
other hand, the volatility of stock return is considerably lower than that of gold returns.
Therefore, the coefficient of variation is lower for KLCI than for gold. This shows
that stock gives a better risk-return trade-off than gold.

Comparing between the gold variables, we find that gold in the US dollar has the
highest return and better risk-return trade-off, while gold in the UK pound has a
greater risk. The currency denominations also display a significant impact on the
returns of gold. There is also a variation of statistics between different types of gold.
As illustrated in the table, Gold Account-i exhibits a lower mean return, a lower
standard deviation, and a less extreme value, as well as a larger coefficient of
variation, compared with the Kijang Emas.

Table 1: Descriptive Statistics of the Gold Returns and Stock Return: 2010-2014.
KE (1 oz) GA-i (1 g) US (1 oz) UK(1 oz) KLCI
Mean 0.0091 0.0069 0.0154 0.0104 0.0350
Std. Dev. 1.0734 1.0383 1.1271 1.2098 0.8449
CV 117.6200 151.0058 73.0576 116.5648 24.1599
Skewness -1.0748 -0.9563 -0.8609 -0.8091 0.3275
Kurtosis 15.1826 13.7859 10.1201 27.8301 208.0649
J-B 7543.385*** 5914.668*** 2644.998*** 30518.93*** 2072816.***
Notes: Returns are multiplied by 100. Std. Dev., CV, and J-B are standard deviation, coefficient of variation and
Jarque-Bera, respectively. An asterisk (***) denotes statistical significance at the 1% level.

Figure 1 illustrates the time series of daily returns of all variables. An important point
to note from the figures is that gold returns are far more volatile if compared with the
domestic stock returns. More specifically, returns of Gold Account-i are slightly less
volatile if compared with the Kijang Emas and the US gold. Gold denominated in the
UK pound, on the other hand, changes rapidly in an unpredictable manner during
November, 2013. This can be explained by the fact that gold account is not only
subject to the return of gold bullion, but also to the local and company-specific factors.
These coincide with the values of standard deviation shown in Table 1. The volatility
of KLCI, on the other hand, is relatively tranquil and consistent, except in February,
2010, due to the uncertain global economic recovery, particularly about the debt
position of several European countries.

11
97
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

KE (1 oz) GA-i (1 g) US (1 oz)

8 8
5.0

4 4 2.5

0.0
0 0

Return (%)
Return (%)

Return (%)
-2.5
-4 -4
-5.0
-8 -8
-7.5

-12 -12
-10.0
I II III IV I II III IV I II III IV I II III IV I II III I II III IV I II III IV I II III IV I II III IV I II III
I II III IV I II III IV I II III IV I II III IV I II III
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
2010 2011 2012 2013 2014

UK (1 oz) KLCI
15 20

10
10
5
Return (%)

Return (%)
0 0

-5
-10
-10

-15 -20
I II III IV I II III IV I II III IV I II III IV I II III I II III IV I II III IV I II III IV I II III IV I II III
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Fig. 1. Time Series of Gold Returns and Stock Return.

Table 2 presents the descriptive statistics sorted by quantiles of stock returns. The
tables show that the gold returns always outperform stock return during extreme stock
market shocks. Nevertheless, stock returns tend to be riskier. The data also generally
show that local gold provides higher returns in most of the quantiles. In terms of risk,
gold in the US dollar and British pound are more volatile in most cases.

Table 2: Descriptive Statistics of the Gold Returns and Stock Return during Extreme
Stock Market Returns (KLCI).
KE (1 oz) GA-i (1 g) US (1 oz) UK (1 oz) KLCI
KLCI < 10% Quantile Obs. 119 119 119 119 119
Mean 0.2703 0.2633 -0.1849 -0.0451 -1.1325
Std. Dev. 1.3240 1.2911 1.5219 1.4825 1.4015
CV 4.8978 4.9037 -8.2301 -32.8752 -1.2376
KLCI < 5% Quantile Obs. 60 60 60 60 60
Mean 0.2496 0.2752 -0.3075 -0.1045 -1.5694
Std. Dev. 1.4772 1.4227 1.6805 1.6811 1.8783
CV 5.9190 5.1702 -5.4644 -16.0937 -1.1969
KLCI < 2.5% Quantile Obs. 30 30 30 30 30
Mean 0.3786 0.3729 -0.2721 -0.0559 -2.0968
Std. Dev. 1.4282 1.3981 1.8730 1.8931 2.5665
CV 3.7726 3.7495 -6.8829 -33.8917 -1.2240
KLCI < 1% Quantile Obs. 12 12 12 12 12
Mean 0.3514 0.2529 -0.6370 -0.3510 -3.1144
Std. Dev. 1.8751 1.8771 2.5165 2.4257 3.9328
CV 5.3362 7.4229 -3.9508 -6.9108 -1.2628
Notes: Returns are multiplied by 100. Obs. and CV are observation and coefficient of variation,
respectively.

4.3 Econometric Model

4.3.1 Systematic Regressions: Diversifier or Hedge

Table 3 shows the estimation results of systematic analysis given by Equations (1.1)-
(1.3). Generally the relationships between gold return and stock return are negative,
which provides evidence that gold and stock is an alternative asset. Nevertheless, the
values and the statistical significance of the diversifying or hedging coefficients vary

12
98
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

across different types of gold. For Kijang Emas coin, the lagged effect exhibits
negative and significant coefficient. This result suggests that Kijang Emas provides
investors the compensating property of a strong hedge. Gold Account-i, gold in the
US dollar and gold in the UK pound, on the other hand, exhibit smaller negative and
insignificant coefficient implying that the reaction to shock is consistent with a weak
hedge.

Table 3: Estimation Results of Systematic Analysis: 2010-2014.

KE (1 oz) GA-i (1 g) US (1 oz) UK (1 oz)
Constant 0.0197 0.0137 0.0507* 0.0336
-0.0019 -0.0165 -0.0468 -0.0577*
-0.0307 -0.0017 0.0084 -0.0317
-0.0925** -0.0267 -0.0241 -0.0078
Note: The asterisks (***), (**) and (*) indicate statistical significance at the 1%, 5% and 10% levels, respectively.

4.3.2 Conditional Regressions: Safe Haven Analysis

Table 4 presents the results of regressions model for analyzing the characteristics of
gold with respective large negative stock market shocks, given by Equations (2.1) and
(2.2). We investigate the relationships between gold returns and stock return
implicitly, conditional on stock return at the lower end of the returns distribution, i.e.,
in or below the 10%, 5%, 2.5%, and 1% quantiles.

The results for the international gold returns denominated in the UK pound and the
US dollar show that gold is a strong safe haven for most quantiles. Gold in the UK
pound appears to serve as a strong safe haven in all quantiles, while the US gold
provides a strong safe haven characteristic in 5% and 1% quantiles. These findings
indicate that both international gold returns provide far much better protection during
losses in the Malaysian stock market.

From the local gold perspective, Kijang Emas coin and Gold Account-i generally act
as a weak safe haven against domestic stock market, except in some quantiles.
Nevertheless, there are significant negative coefficients between domestic gold and
domestic stock in the least extreme market shock (10% quantile). The fact that gold is
a weak safe haven for stock indicates that investors that hold local gold in times of
financial stress and anxiety will find it is difficult to receive compensation for losses
caused by negative stock return. The results thus show that domestic gold reacts
differently to shocks, as opposed to international gold.

Table 4: Estimation Results of Conditional Return Analysis (Conditional on Extreme

Stock Market Returns): 2010-2014.
KE (1 oz) GA-i (1 g) US (1 oz) UK (1 oz)
10% -0.0795** -0.0024 -0.0461 -0.0756*
-0.0336 -0.0371 -0.1266 -0.3233**
5% -0.0282 -0.0005 -0.0377 -0.0769*
-0.1053 -0.1609 -0.3366** -0.5153***
2.5% -0.0176 0.0001 -0.0723 -0.0901
-0.1213 -0.1301 -0.1702 -0.5574***
1% -0.0010 0.0007 -0.0803 -0.0939
-0.3677 -0.2253 -0.8019*** -0.9229***
Note: The asterisks (***), (**) and (*) indicate statistical significance at the 1%, 5% and 10% levels, respectively.

13
99
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

Table 5 shows that, at best, gold fails to work as a strong safe haven against stock
during severe declines in output growth. Gold mainly serves as a weak safe haven
against different stages of extreme output growth, as the safe haven parameters are
statistically insignificant. Nevertheless, gold in the US dollar is not a safe haven in the
10% quantile, since the contemporaneous coefficient is significantly positive. The
results suggest that decreases in output growth in Malaysia are a weak indicator for
investors to invest in gold.

Table 5: Estimation Results of Conditional Return Analysis (Conditional on Extreme

Movements in Output Growth): 2010-2014 (Monthly Data).
KE (1 oz) GA-i (1 g) US (1 oz) UK (1 oz)
10% 0.7435 0.5249 0.8589** 0.6787
0.7576 0.7238 -0.1346 -0.2030
5% 0.3962 0.4819 0.4789 -0.1984
0.1437 0.8861 0.1318 -0.8092
2.5% 0.2285 0.0866 0.9130 -0.0792
0.6126 0.6337 -0.7327 -0.7408
1% -0.1053 -0.2284 1.4069 0.2694
Note: An asterisk (**) indicates statistical significance at the 5% level.

Table 6 presents the results for each gold asset in terms of their potential safe haven
properties, relative to the 90%, 95%, 97.5%, and 99% quantiles of the sample
inflation distributions. Gold only serves as a weak safe haven for stock when inflation
is high. This indicates that during periods of rising inflation in Malaysia, the returns
on gold are unattractive, and do not provide protection against the stock market. In
other words, investors who are keen on securing the safe haven features of gold
investment cannot rely on the long-run basis, since gold can be seen as a ‘panic buy’
during economic uncertainty.

Table 6: Estimation Results of Conditional Return Analysis (Conditional on Extreme

Inflation Shocks): 2010-2014 (Monthly Data).
KE (1 oz) GA-i (1 g) US (1 oz) UK (1 oz)
90% -0.7039 -0.7648 -0.2785 -0.2867
-0.7836 -0.1532 -0.7426 -0.7048
95% -1.0805 -0.9580 -0.5195 -0.8536
0.3772 0.4635 -0.3379 -0.6006
97.5% -0.4050 -0.3776 -0.0990 0.3703
-5.2923 -4.6983 -3.2386 -9.9118
99% 0.7538 0.5993 0.9760 2.7397

Arguably, the recent European sovereign debt crisis seems to suffice as an explanation
for the recent gold price hike, since the empirical estimations that consider the impact
of the crisis can capture the actual behavior of the price of gold quite closely. Since
the UK is arguably the most influential country in Europe, any fluctuations in the
value of the euro or pound are likely to be reflected in inverse proportion to gold in
that currency. Kalbaska and Gątkowski (2012) point out that the EU core countries
such as the UK, France, and Germany hold a significant proportion of PIIGS
(Portugal, Italy, Ireland, Greece, and Spain) debt, and are thus heavily exposed.
Consequently, this could accelerate prompt increased investments in gold as a safe
haven, and the price of this asset fluctuates at high levels.
14
100
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

5. Conclusion
The present study is designed to fill a gap in the related literature by examining the
diversifying, hedging, and safe haven characteristics of official gold bullion coin,
international gold bullions and gold account that complies with the Sharia principles,
by allowing for time-varying and discriminating between systematic and conditional
analyses. The core findings of this study are summarized as follows:

1. This study reports some strong hedging role over mere weak hedging or
diversifying capabilities for local gold. International gold, on the other hand,
performs poorly as a hedge during the same period.
2. With regard to safe haven characteristics, we highlight that local gold, at best,
tends to be a weak safe haven against the stock market. These results indicate that
gold plays a minor role when stock market enters a slump, in line Baur and
McDermott (2010). International gold, while also working as a weak safe haven
against the stock market during extreme economic growth and inflation
conditions, these categories of gold can serve as a strong safe haven during
extreme movements in stock return. The strength of the safe haven effect varies
across market conditions. This property suggests that, international gold works or
fails as a safe haven against stock depending on what is happening in the
direction of the stock itself, but not on the inflation or output growth.
3. Different currency denominations are important in influencing the ability of gold
as a diversifier, a hedge or a safe haven. Gold denominated in Malaysian Ringgit
acts better as a stock hedge than gold denominated in the US dollar or the UK
pound. Gold denominated in international currencies, on the other hand, perform
better as a safe haven against the stock market during extreme movements in
stock return, particularly for gold denominated in the UK pound. Concerning
different types of gold, the gold bullion investment performs better than the gold
account investment, because it provides investors with more evidence of the
compensating property of a strong hedge and strong safe haven against stock in
some extreme market conditions. Therefore, investors who are keen on securing
hedge and safe haven features of gold investment against stock cannot generally
rely on the gold account. Alternatively, they could take a position directly in gold
bullion.

Thus, albeit gold appears as an attractive asset to diversify a portfolio away from
stock, it remains to be a risky investment. The findings of this study are in line with
those by Ciner et al. (2013), where the rise of gold-related financial instruments cause
a decline in its primary attraction as a safe haven for many financial market
participants. Given these findings, identifying the factors that contribute to the
weakening role of gold as a hedge and safe haven will offer plenty of scope for further
research.

Acknowledgment
The authors would like to acknowledge financial support under the Fundamental
Research Grant Scheme 203/PSOSIAL/6711417 provided by the Ministry of
Education Malaysia and the Universiti Sains Malaysia.

15
101
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

REFERENCES
Arshanapalli, B., & Doukas, J. (1993). International stock market linkages: Evidence
from the pre- and post-October 1987 period. Journal of Banking & Finance,
17 (1), 193-208.
Bae, K.-H., Karolyi, G. A., & Stulz, R. M. (2003). A new approach to measuring
financial contagion. The Review of Financial Studies, 16(3), 717-763.
Barisheff, N. (2006). Portfolio diversification with gold, silver and platinum bullion.
The Alternative Investment Management Association (AIMA)(71).
Baur, D. G. (2012). Asymmetric volatility in the gold market. The Journal of
Alternative Investments, 14(4), 26-38.
Baur, D. G., & Lucey, B. M. (2010). Is gold a hedge or a safe haven? An analysis of
stocks, bonds and gold. The Financial Review, 45(2), 217–229.
Baur, D. G., & McDermott, T. K. (2010). Is gold a safe haven? International evidence.
Journal of Banking & Finance, 34(8), 1886–1898.
Baur, D. G., & McDermott, T. K. J. (2013). Financial turmoil and safe haven assets.
Working Papers Series Available at: http://ssrn.com/abstract=2004796, 1-34.
Bernanke, B., & Gertler, M. (1989). Agency costs, net worth and business fluctuations.
American Economic Review, 79(1), 14-31.
Blose, L. E. (1996). Gold price risk and the returns on gold mutual funds. Journal of
Economics and Business, 48(5), 499-513.
Bredin, D., Conlon, T., & Potì, V. (2015). Does gold glitter in the long-run? Gold as a
hedge and safe haven across time and investment horizon. International
Review of Financial Analysis(in press).
Capie, F., Mills, T. C., & Wood, G. (2005). Gold as a hedge against the dollar.
International Financial Markets, Institutions and Money, 15(4), 343–352.
Chossudovsky, M. (2013). Gold and geopolitics: US has largest gold reserves, China
is world’s largest producer of gold. Global Research. Retrieved from
http://www.globalresearch.ca/geopolitics-and-the-world-s-gold-
holdings/24462 website:
Choudhry, T., Hassan, S. S., & Shabi, S. (2015). Relationship between gold and stock
markets during the global financial crisis: Evidence from nonlinear causality
tests. International Review of Financial Analysis(in press).
Chua, J. H., Sick, G., & Woodward, R. S. (1990). Diversifying with gold stocks.
Financial Analysts Journal, 46(4), 76-79.
Ciner, C., Gurdgiev, C., & Lucey, B. M. (2013). Hedges and safe havens: An
examination of stocks, bonds, gold, oil and exchange rates. International
Review of Financial Analysis, 29, 202-211. Retrieved from
Collins, T. (2011). Australia’s gold industry: Trade, production and outlook. 1-5.
http://www.dfat.gov.au/publications/stats-pubs/australias-gold-industry-trade-
production-and-outlook.pdf Retrieved from
http://www.dfat.gov.au/publications/stats-pubs/australias-gold-industry-trade-
production-and-outlook.pdf
Comincioli, B. (1996). The stock market as a leading indicator: An application of
granger causality. The Park Place Economist, 4(1), 31-40.
Conover, C. M., Jensen, G. R., Johnson, R. R., & Mercer, J. M. (2009). Can precious
metals make your portfolio shine? Journal of Investing, 18(1), 75-86.
Coudert, V., & Raymond-Feingold, H. (2011). Gold and financial assets: Are there
any safe havens in bear markets? Economics Bulletin, 31(2), 1613-1622.

16
102
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

Cuddington, J. T. (1981). Money, income, and causality in the United Kingdom: An

empirical reexamination. Journal of Money, Credit and Banking, 13(3 ), 342-
351.
Dicle, M. F., Levendis, J., & Alqotob, J. M. (2011). Is gold a safety asset? Retrieved
from http://ssrn.com/abstract=1953425 or
http://dx.doi.org/10.2139/ssrn.1953425
Do, G. Q., Mcaleer, M., & Sriboonchitta, S. (2009). Effects of international gold
market on stock exchange volatility: Evidence from asean emerging stock
markets. Economics Bulletin, 29(2), 599–610.
Dornbusch, R., Park, Y. C., & Claessens, S. (2000). Contagion: Understanding how it
spreads. The World Bank Research Observer, 15(2), 177-197.
Faff, R., & Chan, H. (1998). A multifactor model of gold industry stock returns:
Evidence from the Australian equity market. Applied Financial Economics,
8(1), 21-28.
Forbes, K. J., & Rigobon, R. (2002). No contagion, only interdependence: Measuring
stock market co-movements. Journal of Finance, 57(5), 2223-2261.
Ghazali, M. F., Lean, H. H., & Bahari, Z. (2013). Is gold a hedge or a safe haven? An
empirical evidence of gold and stocks in Malaysia. International Journal of
Business and Society, 14(3), 428-443.
Ghazali, M. F., Lean, H. H., & Bahari, Z. (2015). Sharia compliant gold investment in
Malaysia: Hedge or safe haven? Pacific-Basin Finance Journal, 34, 192–204.
Gürgün, G., & Ünalmış, İ. (2014). Is gold a safe haven against equity market
investment in emerging and developing countries? Finance Research Letters,
11(4), 341-348.
Hillier, D., Draper, P., & Faff, R. (2006). Do precious metals shine? An investment
perspective. Financial Analysts Journal, 62(2), 98-106.
Hoang, T. H. V. (2011). Gold quoted in Paris and the diversification of French
portfolios from 2004 to 2009. Euro-Mediterranean Economics and Finance
Review, 6(2), 81-101.
Hoang, T. H. V., Lean, H. H., & Wong, W.-K. (2015). Is gold good for portfolio
diversification? A stochastic dominance analysis of the Paris stock exchange.
International Review of Financial Analysis(in press).
Hood, M., & Malik, F. (2013). Is gold the best hedge and a safe haven under changing
stock market volatility? Review of Financial Economics, 22(2), 47-52.
Ibrahim, M. H. (2012). Financial market risk and gold investment in an emerging
market: The case of Malaysia. International Journal of Islamic and Middle
Eastern Finance and Management, 5(1), 25-34.
Ibrahim, M. H., & Baharom, A. H. (2011). The role of gold in financial investment: A
Malaysian perspective Economic Computation and Economic Cybernetics
Studies and Research, 45(4), 227-238.
Jaffe, J. F. (1989). Gold and gold stocks as investments for institutional portfolios.
Financial Analysts Journal, 45(2), 53-59.
Jaiswal, U. K., & Voronina, V. (2012). Relationship between gold and stock returns:
Empirical evidence from BRICs. (Master of Science in Finance Master Thesis),
Umeå University.
Kalbaska, A., & Gątkowski, M. (2012). Eurozone sovereign contagion: Evidence
from the CDS market (2005-2010). Journal of Economic Behavior &
Organization, 83(3), 657-673.
King, R. G., & Plosser, C. I. (1984). Money, credit and prices in a real business cycle.
American Economic Review, 74(3), 363-380.

17
103
ISSN 2412-4044 BEFB 2016 June 24 - 27, 2016, Sapporo, Japan

Kiyotaki, N., & Moore, J. (1997). Credit cycles. Journal of Political Economy, 105(2),
211-248.
Kydland, F. E., & Prescott, E. C. (1982). Time to build and aggregate fluctuations.
Econometrica, 50(6), 1345-1370.
Lee, S. B., & Kim, K. J. (1993). Does the october 1987 crash strength the co-
movements among national stock markets. Review of Financial Economics,
3(1), 89-102.
Long, J. B., & Plosser, C. I. (1983). Real business cycles. Journal of Political
Economy, 91(1), 39-69.
Lucey, B. M. (2011, May 2011). What do academics think they know about gold?
Alchemist, 12-14.
Lucey, B. M., Tully, E., & Poti, V. (2006). International portfolio formation,
skewness and the role of gold. Frontiers in Finance and Economics Bulletin,
3(1), 1–17.
McDonald, J. G., & Solnick, B. H. (1977). Valuation and strategy for gold stocks. The
Journal of Portfolio Management, 3(3), 29-33.
Mensi, W., Hammoudeh, S., Reboredo, J. C., & Nguyen, D. K. (2015). Are Sharia
stocks, gold and U.S. Treasury hedges and/or safe havens for the oil-based
GCC Markets? Emerging Markets Review, 24, 101-121.
Meric, I., & Meric, G. (1997). Co-movements of European equity markets before and
after the 1987 crash. Multinational Finance Journal, 1(2), 137-152.
Michaud, R., Michaud, R., & Pulvermacher, K. (2006). Gold as a strategic asset.
World Gold Council, 1-32.
Miyazaki, T., & Hamori, S. (2013). Testing for causality between the gold return and
stock market performance: Evidence for ‘gold investment in case of
emergency’. Applied Financial Economics, 23(1), 27–40.
Pearce, D. K. (1983). Stock prices and the economy. Economic Review - Federal
Reserve Bank of Kansas City(November), 7-22.
Peng, L., Xiong, W., & Bollerslev, T. (2007). Investor attention and time-varying
comovements. . European Financial Management, 13(3), 394–422.
Phillips, A. W. (1958). The relation between unemployment and the rate of change of
money wage rates in the United Kingdom, 1861–1957. Economica, 25(100),
283–299.
Pullen, T., Benson, K., & Faff, R. (2014). A comparative analysis of the investment
characteristics of alternative gold assets. Abacus, 50(1), 76-92. Retrieved
from SSRN: http://ssrn.com/abstract=1928591 or
http://dx.doi.org/10.2139/ssrn.1928591
Ratner, M., & Klein, S. (2008). The portfolio implications of gold investment.
Journal of Investing, 17(1), 77-87.
Sherman, E. J. (1982). Gold: A conservative, prudent diversifier. The Journal of
Portfolio Management, 8(3), 21-27.
Smith, G. (2002). London gold prices and stock prices in Europe and Japan. World
Gold Council.
Tobin, J. (1969). A general equilibrium approach to monetary theory. Journal of
Money, Credit and Banking, 1(1), 15-29.
Vandeloise, S., & Wael, M. V. d. (1990). Gold and portfolio diversification.
Tsjdschrift voor Economie en Management, 35(1), 29-38.
Wozniak, R. (2008). Gold as a strategic asset for UK investors. World Gold Council.

18
104