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Int. J. Financial Stud. 2017, 5(3), 18; https://doi.org/10.3390/ijfs5030018

Does Gold Act as a Hedge and a Safe Haven for China’s Stock Market?

School of Finance and Statistics, Hunan University, Changsha, Hunan 410079, China
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Academic Editor: Nicholas Apergis
Received: 28 June 2017 / Revised: 5 August 2017 / Accepted: 8 August 2017 / Published: 17 August 2017
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Abstract

This paper examines the dynamic relationships between gold and stock markets in China. Using daily gold and stock indexes data, we estimated the DCC-GARCH model for the five bear markets since 31 October 2002, and simultaneously used different segments of China’s stock markets for analysis. Our main objective was to examine the time-varying correlations between gold and stock and to check the effectiveness of gold as a hedge or a safe haven for stocks. Results showed that: (1) the dynamic conditional correlations switched between positive and negative values over the periods under study; (2) due to the increasing investment demand of gold, the hedging effect of gold on China’s stock market has strengthened remarkably. Gold acts as a safe haven for only the latest two of the five bear markets analyzed (12 June 2015–26 August 2015 and 22 December 2015–29 February 2016); and (3) for non-bear markets, gold does not offer good risk hedging. View Full-Text
Keywords: gold; bear markets; correlation; safe haven; hedge gold; bear markets; correlation; safe haven; hedge
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Chen, K.; Wang, M. Does Gold Act as a Hedge and a Safe Haven for China’s Stock Market? Int. J. Financial Stud. 2017, 5, 18.

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