Investigating the Effect of Gold Leading and Lagging Relative to the Stock and Housing Market, Considering the Effect of Macroeconomic Variables

Abstract

Purpose: This research examines the existence of the lead-lag effect in the gold markets compared to the stock and housing markets, taking into account the effect of macroeconomic variables. In emerging and relatively inefficient markets, returns are not normally distributed and have a high sequential correlation with each other. Also, price changes are not independent and random and there is a certain trend and pattern in the behavior of prices that knowledge of these patterns is necessary to gain more benefits for capital. It helps investors. One of the patterns that can be investigated in addition to market inefficiency is to investigate the existence of the lead-lag effect.

Method: In this research, the Lead-Lag model was analyzed using the VAR test and the LRSM test for long-term data during the years 1390 to 1401 on a monthly basis.

Findings: Financial stress shows that the inflation rate is a weak shelter for shareholders. Meanwhile, regarding whether gold is a hedge instrument against inflation, our result was able to prove this feature, which means that investing in gold is a reliable hedge. Here, the inflation rate lags behind gold and is obviously a good hedge against inflation. This paper shows that inflation shocks lead to a negative reaction to gold prices in the long run. In the short run, only gold price fluctuations affect inflation, and this causality is one-way.

Conclusion: From these findings, it can be concluded that the most exogenous variable, gold, followed by oil and the dollar, can be interpreted as the primary receivers of exogenous shocks, while housing prices, stocks, and the inflation rate seem to bear the burden of short-term adjustment endogenously, rather than the system return to its long-term state. The results show that gold is the most exogenous variable, while the inflation rate is the least endogenous variable. According to the research, it shows that the inflation rate cannot protect against changes in the price of gold.