Are precious metals a hedge against exchange-rate movements? An empirical exploration using bayesian additive regression trees |
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Institution: | 1. Department of Economics, University of Santiago de Compostela, Avda. Xoán XXIII s/n, 15782 Santiago de Compostela, Spain;2. Post graduate programme in management—PPGA, Unifacs, Rua Dr. José Peroba 251, 41770-235 Salvador, Brazil |
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Abstract: | We use Bayesian additive regression trees to reexamine whether investments in precious metals are a hedge against exchange-rate movements. We quantify the relative importance of several major exchange rates, and we study how the marginal effects differ across times of appreciations/depreciations and across times of small/large exchange-rate fluctuations. Results show that investments in gold and silver are strong hedges against depreciations of major exchange rates. The hedging properties of palladium and platinum are mainly confined to the Australian dollar and Canadian dollar. We also study whether precious metals investments are a safe-haven in times of large exchange-rate movements. |
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Keywords: | Precious metals Exchange-rate movements BART Hedging Safe haven |
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