Popular safe haven assets, do they really exist for stock markets? Analysis on gold, Japanese yen and Swiss franc.

• Main Authors: Liu, Chang., Ho, Pauline., Xu, Qiong.
• Other Authors: Vinay Kumar Kariwala
• Format: Final Year Project
• Language: English
• Published: 2013
• Subjects: DRNTU::Social sciences::Economic theory; DRNTU::Social sciences::General
• Online Access: http://hdl.handle.net/10356/52142
• Institution: Nanyang Technological University

The onset of financial crises often sends investors seeking for safe haven assets. Financial press frequently claimed assets such as Japanese yen, Swiss franc and gold rise or maintain in their values in times of adversity in stock markets, hence terming them as “Safe Haven”. The aim of this paper is to examine the existence of the three assets’ safe haven and hedging properties for stock markets, across 13 countries over a span of 17 years (1996-2012). Employing GARCH model on daily equity return data, we establish empirically proven results on their safe haven status. The quantitative results obtained prove that the safe haven and hedging properties do exist in the three assets for developed economies with yen being the best performer. For emerging economies, we discover yen is the only hedging and safe haven asset. After further classifying the stock market data into bull and bear periods, then by looking at the days of extreme negative returns in each situation, we realize that the safe haven effect in these assets tends to be stronger in bearish stock markets. Interestingly, gold loses its safe haven property for extremely negative daily returns of bullish stock markets while yen persists on as the strongest safe haven asset possible overall.