The Destruction of a Safe Haven Asset?

  • Dirk G Baur University of Technology, Sydney
  • Kristoffer J Glover University of Technology, Sydney
DOI: https://doi.org/10.24135/afl.v1i1.5
Keywords: safe haven, gold, investor behaviour, funding constraints, contagion

Abstract

Gold has been a store of value for centuries and a safe haven for investors in the past

decades. However, the increased investment in gold for speculative or hedging purposes

has changed the safe haven property. We demonstrate theoretically and empirically

that investor behaviour has the potential to destroy the safe haven property of gold. The

results suggest that an asset cannot be both an investment asset and an effective safe

haven asset. This finding has important implications for financial stability since assets are

more likely to exhibit excess comovement and volatility in the absence of a safe haven.

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Author Biographies

Dirk G Baur, University of Technology, Sydney

Dirk G. Baur is Associate Professor in Finance at the University of Technology Sydney, Australia.

Kristoffer J Glover, University of Technology, Sydney

Kristoffer J. Glover is a Postdoctoral Research Fellow in Finance at the University of Technology Sydney, Australia.

Published
2016-07-20
How to Cite
Baur, D. G., & Glover, K. J. (2016). The Destruction of a Safe Haven Asset?. Applied Finance Letters, 1(1), 8-15. https://doi.org/10.24135/afl.v1i1.5
Issue
Vol. 1 No. 1 (2012): Investing in an Uncertain Environment
Section
Articles submitted to regular issue

Copyright (c) 2016 Dirk G Baur, Kristoffer J Glover

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