1 - LEONARDO OLIVEIRA PENNA DE CARVALHO UNIVERSIDADE FEDERAL DA BAHIA (UFBA) - Escola de administração
2 - Miguel Angel Rivera Castro UNIVERSIDADE SALVADOR (UNIFACS) - mestrado em administração
3 - Rodrigo Ladeira UNIVERSIDADE FEDERAL DA BAHIA (UFBA) - Escola de Administração
4 - Ademir Luis Teles Brito UNIVERSIDADE SALVADOR (UNIFACS) - Administraçao
5 - Caroline Rohenkohl Santos Penna de Carvalho UNIVERSIDADE SALVADOR (UNIFACS) - Salvador
Reumo
This work analyzes the coverage capacity of gold over extreme variations in the Brazilian stock exchange (BM&FBovespa). For this purpose, a likelihood ratio test was developed based on the dependence structure between gold and eleven stock indexes from BM&FBovespa. It was investigated if gold obtains an extreme increase in its value when the indexes suffer an extreme loss of value, or vice-versa.
All around the world, investors and the financial media believe that the price of gold tends to move in the opposite direction of the stock price. Opposite direction movements would open the possibility of using gold as diversification and/or safe haven against extreme movements of BM & Bovespa.
However, can gold protect the investor from extreme devaluations in the Brazilian stock market? Thereby, to answer this question, this work expands the scope of previous studies investigating the behavior of gold against 11 Brazilian stock exchange indexes, especially in extreme market conditions.
Baur and Lucey (2010) examined gold in relation to the stock market. Baur and McDermot (2010) analyzed the safe haven capacity of gold in several countries and found evidence that investors from developed countries react differently to those in developing countries during the economic crises. This, according to the authors' speculation, could be due to the fact that developing countries could resort to other instruments of protection, such as the exchange rate or even securities of developed countries, before it was even necessary to resort to gold as a protection instrument.
To conduct this study, extreme movements between gold and the Brazilian stock market were investigated based on the extreme value analysis (EVA). Thus, the relationship in both markets was investigated through many propositions formulated about the conditional dependence between them.
From the analysis of the data, we obtained the following results for the period studied: (i) gold acted as an effective hedge and as a weak safe haven for the IBrX 100, IEE, INDX and SMLL indexes, which means that gold remained in a non- extreme state while these indexes have moved in an extreme way, guaranteeing protection to the investors in those moments; (ii) gold was a weak safe haven, although it did not act as a hedge for the ITEL, IFIX and IMOB indexes and (iii) gold acted as hedge, although it did not act as a safe haven for the IMAT, UTIL, MLCX and IGCT indexes.
It is clear that gold, in all cases, acted either as a hedge or as a weak safe haven for the indexes analyzed, which indicates that including gold in an investment portfolio provides hedge benefits and safe haven for the investor
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