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Gold and Stock Market Linkage: Pre- and Post-Covid-19 Periods

Year 2022, Volume: 6 Issue: 2, 123 - 131, 12.10.2022

Abstract

Purpose: This study investigates the relationship between gold and stock market returns of Borsa Istanbul for the year 2000-2021. This time period is seperated into two subsamples as pre-Covid-19 and post-Covid-19 periods in order to see whether the relationship between gold and stock prices are affected by the Covid-19 disease or not.

Methodology: The ordinary least square method is utilized for the analyses. The interaction term of credit default swap premiums with stock market returns is also included into baseline model in order to observe effects of stress in the financial markets on this link.

Findings: The empirical results mainly show that there exists a negative and significant relationship between gold and market returns in Turkey for both pre- and post-Covid-19 periods. On the other hand, the interaction term is found to be negative and significant for pre-Covid19 period, which indicates that an decrease in the stock market returns during the times of economic stress lead to an increase in the gold prices before the Covid-19. However, the interaction term is found to be significant and positive for the post-Covid-19 period, which points out that when economic stress upsurge in the pandemic period, a decline in the stock market does not lead to a rise in the gold prices.

Implications: The gold is regarded as safe haven and a hedge tool against equity market investments before the Covid-19 period in difficult times of economy. However, this property of gold as a hedge instrument to be used in diversifying portfolios cannot be valid for the period aftermath of the Covid-19.

References

  • Aksoy, M. & Topcu, N. (2013). Altın ile Hisse Senedi ve Enflasyon Arasındaki İlişki. Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi27(1), 59-78.
  • Al-Ameer, M., Hammad, W., Ismail, A. & Hamdan, A. (2018). The Relationship of Gold Price with the Stock Market: The Case of Frankfurt Stock ExchangeInternational. Journal of Energy Economics and Policy, 8(5), 357-371.
  • Chemkha, R., BenSaido, A., Ghorbel, A. & Tayachi, T. (2021). Hedge and safe haven properties during COVID-19: Evidence fromBitcoin and gold. The Quarterly Review of Economics and Finance, 82 (2021), 71–85.
  • Coudert, V. & Raymond, H. (2010). Gold and Financial Assets: Are There any Safe Havens in Bear Markets?. CEPII, WP No. 2010-13, 1-39.
  • Choudhry, T., Hassan, S.S. & Shabi, S. (2015). Relationship between gold and stock markets during the global financial crisis: Evidence from nonlinear causality tests. International Review of Financial Analysis, 41, 247–256.
  • Daehler, T.B., Aizenman J., Jinjarak, Y. (2021). Emerging markets sovereign CDS spreads during COVID-19: Economics versus epidemiology news. Economic Modelling, 100 (2021), 105504.
  • Drake, P.P. (2022). The gold-stock market relationship during COVID-19. Finance Research Letters, 44(2022),102111. Gürgün, G. & Ünalmış, İ. (2014). Is gold a safe haven against equity market investment in emerging and developing countries?. Finance Research Letter, 11(4), 341-348.
  • Hillier, D. Draper, P. & Faff, R. (2006) Do Precious Metals Shine? An Investment Perspective. Financial Analysts Journal, 62(2), 98-106.
  • Kartal, M.T. (2020). The behavior of Sovereign Credit Default Swaps (CDS) spread: evidence from Turkey with the effect of Covid-19 pandemic. Quantitatuive Finance and Economics, 4(3), 489–502.
  • Smith G. (2002). London gold prices and stock price indices in Europe and Japan. World Gold Council, 9(2), 1–30.
  • Yildirim, H., Boyaci Yildirim, M., & Limoncuoglu, A. (2021). Escape from COVID-19 pandemic to safe haven. Journal of Public Affairs, 21(4), e2728.

Altın ve Hisse Senedi Getirisi İlişkisi: Covid-19 Öncesi ve Sonrası Dönemleri

Year 2022, Volume: 6 Issue: 2, 123 - 131, 12.10.2022

Abstract

Amaç: Bu çalışma altın fiyatları ile Borsa Istanbul’da hisse senedi fiyatların arasındaki ilişkiyi 2000-2021 dönemi için incelemektedir. Çalışmanın zaman dilimi Covid-19 hastalığı göz önüne alınarak iki Covid-19 öncesi ve sonrası olarak iki ayrı döneme ayrılmıştır. Böylece Covid-19’un altın ve hisse senedi piyasası ilişkisini etkileyip etkilemediği gözlemlenebilecektir.
Yöntem: Çalışmanın analizleri için basit doğrusal regresyon yöntemi kullanılmıştır. Ayrıca kredi temerrüt takası primleri ile piyasa getirisinin çarpımı ile elde edilen etkileşim terimi, ekonomik stressin arttığı zamandaki altın-hisse senedi ilişkisini gözlemlemek için ana modele eklenmiştir.
Bulgular: Çalışmanın sonucunda her iki dönemde de altın ve hisse senedi arasında negatif ve anlamlı bir ilişki buluşmuştur. Ancak etkileşim değişkeni göz önüne alındığında, Covid-19 öncesi dönemde ekonomik belirsizliğin ve stresin arttığı dönemlerde hisse senedi piyasasındaki düşüşler altın fiyatlarında artışa neden olmaktadır. Covid-19 ve sonrası dönemde ise hisse senedi piyasasındaki düşüşler, ekonomik kaygının arttığı zamanlarda bile altın fiyatlarında artışa neden olmamaktadır.
Sonuç: Covid-19 dönemi öncesinde ekonominin durgunlaştığı zamanlarda, altın yatırımcılar tarafından güvenli bir liman olarak görülürken, Covid-19 sonrası dönemde stresin arttığı zamanlarda bile artık hisse senedi çeşitlendirmesi için bir önlem aracı olarak değerlendirilemeyeceği gözlemlenmiştir.

References

  • Aksoy, M. & Topcu, N. (2013). Altın ile Hisse Senedi ve Enflasyon Arasındaki İlişki. Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi27(1), 59-78.
  • Al-Ameer, M., Hammad, W., Ismail, A. & Hamdan, A. (2018). The Relationship of Gold Price with the Stock Market: The Case of Frankfurt Stock ExchangeInternational. Journal of Energy Economics and Policy, 8(5), 357-371.
  • Chemkha, R., BenSaido, A., Ghorbel, A. & Tayachi, T. (2021). Hedge and safe haven properties during COVID-19: Evidence fromBitcoin and gold. The Quarterly Review of Economics and Finance, 82 (2021), 71–85.
  • Coudert, V. & Raymond, H. (2010). Gold and Financial Assets: Are There any Safe Havens in Bear Markets?. CEPII, WP No. 2010-13, 1-39.
  • Choudhry, T., Hassan, S.S. & Shabi, S. (2015). Relationship between gold and stock markets during the global financial crisis: Evidence from nonlinear causality tests. International Review of Financial Analysis, 41, 247–256.
  • Daehler, T.B., Aizenman J., Jinjarak, Y. (2021). Emerging markets sovereign CDS spreads during COVID-19: Economics versus epidemiology news. Economic Modelling, 100 (2021), 105504.
  • Drake, P.P. (2022). The gold-stock market relationship during COVID-19. Finance Research Letters, 44(2022),102111. Gürgün, G. & Ünalmış, İ. (2014). Is gold a safe haven against equity market investment in emerging and developing countries?. Finance Research Letter, 11(4), 341-348.
  • Hillier, D. Draper, P. & Faff, R. (2006) Do Precious Metals Shine? An Investment Perspective. Financial Analysts Journal, 62(2), 98-106.
  • Kartal, M.T. (2020). The behavior of Sovereign Credit Default Swaps (CDS) spread: evidence from Turkey with the effect of Covid-19 pandemic. Quantitatuive Finance and Economics, 4(3), 489–502.
  • Smith G. (2002). London gold prices and stock price indices in Europe and Japan. World Gold Council, 9(2), 1–30.
  • Yildirim, H., Boyaci Yildirim, M., & Limoncuoglu, A. (2021). Escape from COVID-19 pandemic to safe haven. Journal of Public Affairs, 21(4), e2728.
There are 11 citations in total.

Details

Primary Language English
Subjects Finance
Journal Section Articles
Authors

Bilge Canbaloğlu 0000-0001-6352-0079

Publication Date October 12, 2022
Published in Issue Year 2022 Volume: 6 Issue: 2

Cite

APA Canbaloğlu, B. (2022). Gold and Stock Market Linkage: Pre- and Post-Covid-19 Periods. Başkent Üniversitesi Ticari Bilimler Fakültesi Dergisi, 6(2), 123-131.