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Gold, bonds, and epidemics: A safe haven study
Tonmoy Choudhury1, Harald Kinateder2, Biwesh Neupane3
1IRC for Finance and Digital Economy, KFUPM Business School, King Fahd University of Petroleum and Minerals, KSA.
Abstract:
The COVID-19 pandemic raised the question whether gold and sovereign bonds are a safe haven during epidemics. We study the effectiveness as safe haven during the epidemics caused by SARS, Ebola, Zika, Swine Flu, and COVID-19. To this end, this study employs a DCC-GARCH model to analyze the conditional correlations between daily returns of S&P 500 and MSCI Emerging Markets Index with gold and the major sovereign bonds. Our results show that gold is a weak safe haven for stock market investors during the epidemics, and U.S. treasuries are the safest option, followed by Japanese sovereign bonds.
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