GOLD INVESTMENTS AND SHORT- AND LONG-RUN PRICE DETERMINANTS OF THE PRICE OF GOLD
Examiners: Professor Mika Vaihekoski Professor Eero Pätäri
Helsinki, August 29, 2007 Anssi Lampinen Linnoituksentie 10 F 59 00940 Helsinki
ABSTRACT Author: Title: Faculty: Major: Year: Master’s Thesis: Examiners: Keywords: Lampinen, Anssi Gold investments and short- and long-run price determinants of the price of gold LUT, School of Business Finance 2007 Lappeenranta University of Technology 77 pages, 12 figures and 9 tables prof. Mika Vaihekoski prof. Eero Pätäri gold, inflation hedging, vector autoregressive model, error correction mechanism, finance This study examines the short- and long-run price determinants of the price of gold. Second, it investigates the possibilities of gold investing. Monthly data consisting of US and world consumer price indexes, US and world inflation and inflation volatility, beta of gold, gold lease rate, credit default risk and US-world exchange rate index from December 1972 to August 2006 is used in this study. Cointegration regression techniques are used to develop a model and find the key determinants for the price of gold. We also examined the literature to find out what different investment methods and instruments exist on the gold markets. The empirical results of this study support the results of previous studies. We found further evidence that gold can be regarded as a long-run hedge against the inflation and that the price of gold moves inline with the general price level. However, the movements in the nominal price of gold are dominated by short-run influences and that the long-run relationship has less impact at any given time. We also found that gold is readily available to investors in all the major markets and a plentiful of instruments can be used.
TIIVISTELMÄ Tekijä: Tutkielman nimi: Osasto: Pääaine: Vuosi: Pro gradu -tutkielma: Tarkastajat: Hakusanat:... [continues]
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