Safe haven assets and inflation hedging in the selected high and low inflation countries

Nurul Fasyah Mohd Ussdek (2023) Safe haven assets and inflation hedging in the selected high and low inflation countries. Masters thesis, Universiti Malaysia Sabah.

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Abstract

Inflation become a major concern to investors. It also known as macroeconomic problem, which is reduce purchasing power and currency in an economy’s countries. Since the Great Depression, investors frequently shift their portfolios into less risky and more liquid securities. Precious metals such as gold and silver rise to the top of the list of options to be consider as a hedge and a safe haven against inflation due to their miniature substitutability and close resemblance. Investing in nonferrous metal is considered to be a good way to diversify risk and hedge against inflation. Copper with a long long-term industrial demand that should not be overlooked in terms of economic growth. The prices of copper are affected by supply and demand in terms of its industria l property. Besides that, this industrial metal is the most sensitive to inflation and the dollar due to its uses and economic growth. Maintaining a stable inflation rate has become one of the challenges in the macroeconomic management of the most countrie s. The selected countries are divided into low and high inflation. Among countries, each country has a very unique experience in terms of inflation. Also, these countries have a combination of the biggest producers and consumers of gold, silver, and copper copper. The analysis is carried out based on the seemingly unrelated regression (SUR) approach to estimate the ability of gold, silver, and copper metal as a hedge and safe haven against inflation in each country. This method has taken care the hidden interactio interaction among error terms that provided information in different equations. Despite widespread acceptance of gold and silver as a hedge and safe haven assets, empirical research on these topics is limited, particularly in the context of the countries with differ ent inflation rate. Furthermore, the importance of copper as an investment alternative should be considered by investors. The objective of this study is to identify the ability of these metals as a hedge and safe haven against high and low inflation countr ies. The empirical result of this study show shows that gold, silver and copper in denominated local currency have a stronger hedge against high inflation. In terms of the safe haven feature, the quantile relations show that local currency, at best, tends to be strong safe haven against high inflation. In conclusion, these results demonstrate that these metals play a major role during market slumps and inflationary episodes in each country. Therefore, holding a well well-diversified portfolio could potentially provid e reasonable return and protection from economic collapse.

Item Type:	Thesis (Masters)
Keyword:	Inflation, Macroeconomic problem, Purchasing power, Currency
Subjects:	H Social Sciences > HG Finance > HG1-9999 Finance > HG4501-6051 Investment, capital formation, speculation
Department:	FACULTY > Labuan Faculty of International Finance
Depositing User:	DG MASNIAH AHMAD -
Date Deposited:	09 Sep 2024 11:40
Last Modified:	09 Sep 2024 11:40
URI:	https://eprints.ums.edu.my/id/eprint/40877

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