Extra-market sensitivity to a gold price factor: Evidence from national market portfolios

This paper investigates the extra-market sensitivity of aggregate national market equity returns to a gold price factor. A sample of twenty countries is analysed over the full sample period 1975 to 1994, while a total of thirty seven countries are examined over the period 1988 to 1994. Our main results suggest that, over our full sample period, six countries reveal an extra-market sensitivity to gold returns. These countries are Australia, Canada, Norway, South Africa, Switzerland and the United States, with all but the US showing a positive sensitivity. Moreover, national market sensitivity coefficients are somewhat unstable, particularly for Belgium, France, Hong Kong, the Netherlands and South Africa. Over the period 1988 to 1994, nine countries exhibit a significant extra-market sensitivity to gold returns. These countries are: Belgium, France, Germany, Japan, the United States, South Africa, Argentina, Brazil and Taiwan. Of these countries Japan, South Africa and Brazil show positive extra-market sensitivity while the others are all negative. In summary, of the thirty-seven countries examined in this paper, a total of fifteen reveal at least some evidence of extra-market sensitivity to gold. Furthermore, there is a pervasive finding that, with the exception of Japan, the point estimates of the sensitivities have become more negative over time.