Title: Does gold a safe haven during the crisis period? Explanation by behavioural finance for the GCC and BRIC markets

Authors: Achraf Ghorbel

Addresses: Faculty of Economics and Management, University of Sfax, Street of Airport, km 4.5, LP 1088, Sfax 3018, Tunisia

Abstract: This paper investigates the interaction between the volatilities of gold price, stock markets of the emerging countries (GCC and BRIC) and investors' sentiment (VIX). Accordingly, we first examined the effect of the investors' sentiment shocks on the volatility of gold price and stock markets and analysed the dynamic correlation between them. Second, we evaluated the optimal weights, the optimal hedge and the hedging effectiveness ratios for gold-stock portfolio holdings. The empirical results showed that the shocks of investors' sentiment significantly affect the volatilities of gold and emerging stock markets. Moreover, a sharp fall in the dynamic conditional correlation was observed between gold-VIX and gold-emerging stock market pairs during the period of stress. These results provide the orientation of investors to the gold market for hedging when the fear sentiment and the pessimism dominate the stock markets.

Keywords: gold; hedge ratios; portfolio diversification; GARCH models; behavioural finance.

DOI: 10.1504/IJMABS.2018.097913

International Journal of Markets and Business Systems, 2018 Vol.3 No.4, pp.333 - 361

Received: 21 Feb 2018
Accepted: 08 Aug 2018

Published online: 14 Feb 2019 *

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