What Drives Gold Returns? A Decision Tree Analysis

Anastasios G Malliaris; Mary Malliaris; A. (Tassos) G. Malliaris

doi:10.1016/j.frl.2015.03.004

What Drives Gold Returns? A Decision Tree Analysis

Loyola University Chicago

Loyola University Chicago

Research output: Contribution to journal › Article › peer-review

Abstract

The behavior of gold as an investment asset has been researched extensively. For the very long run, that is several decades, gold does not outperform equities. However, for shorter periods, gold responds to fears of inflation, stock market corrections, currency crises, and financial instabilities very vigorously. In this paper we follow a decision tree methodology to investigate the behavior of gold prices using both traditional financial variables such as equity returns, equity volatility, oil prices, and the euro. We also use the new Cleveland Financial Stress Index to investigate its effectiveness in explaining changes in gold prices. We find that gold returns depend on different determinants across various regimes.

Original language	American English
Journal	School of Business: Faculty Publications and Other Works
Volume	13
DOIs	https://doi.org/10.1016/j.frl.2015.03.004
State	Published - Mar 1 2015

Keywords

Gold prices
Uncertainty
Decision tree analysis
Financial Stress Index

Disciplines

Business

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title = "What Drives Gold Returns? A Decision Tree Analysis",

abstract = " The behavior of gold as an investment asset has been researched extensively. For the very long run, that is several decades, gold does not outperform equities. However, for shorter periods, gold responds to fears of inflation, stock market corrections, currency crises, and financial instabilities very vigorously. In this paper we follow a decision tree methodology to investigate the behavior of gold prices using both traditional financial variables such as equity returns, equity volatility, oil prices, and the euro. We also use the new Cleveland Financial Stress Index to investigate its effectiveness in explaining changes in gold prices. We find that gold returns depend on different determinants across various regimes.",

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AB - The behavior of gold as an investment asset has been researched extensively. For the very long run, that is several decades, gold does not outperform equities. However, for shorter periods, gold responds to fears of inflation, stock market corrections, currency crises, and financial instabilities very vigorously. In this paper we follow a decision tree methodology to investigate the behavior of gold prices using both traditional financial variables such as equity returns, equity volatility, oil prices, and the euro. We also use the new Cleveland Financial Stress Index to investigate its effectiveness in explaining changes in gold prices. We find that gold returns depend on different determinants across various regimes.

KW - Gold prices

KW - Uncertainty

KW - Decision tree analysis

KW - Financial Stress Index

UR - https://ecommons.luc.edu/business_facpubs/80

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VL - 13

JO - School of Business: Faculty Publications and Other Works

JF - School of Business: Faculty Publications and Other Works

ER -

What Drives Gold Returns? A Decision Tree Analysis

Abstract

Keywords

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