the “golden” question
DESCRIPTION
or. The “Golden” Question. S & P 500. Gold?. Ali Alyabis Andrew Clark David Lee. Executive Summary. The “Golden” Question Previous Research Our Hypothesis Procedure and Methods Identify Key Models and Relationships Final Model Different Ways to Look at the Data - PowerPoint PPT PresentationTRANSCRIPT
The “Golden” Question
Ali AlyabisAndrew ClarkDavid Lee
S & P 500
Gold?
or
Executive Summary•The “Golden” Question•Previous Research•Our Hypothesis•Procedure and Methods•Identify Key Models and Relationships•Final Model•Different Ways to Look at the Data•Investment Implication
The “Golden” Question“If at the beginning of next month you had $1,000, would you want to invest in…”
S & P stocks or Gold?
?????
Previous Research•Prior Economic Indicators of Performance
•Dow/Gold Ratio
Our Hypothesis
ECONOMIC EXPECTATIONS
ECONOMIC EXPECTATIONS
•Follow CRISP guidelines
•Gather monthly data from April 1970-Present:▫ US Bureau of Labor Statistics
▫ FRED (Federal Reserve Economic Database)
▫ Misery Index
▫ S&P (Yahoo Finance)
▫ Gold Prices (Goldnews.com)
•Clean data
Procedure and Methods
•Output: Binary: If %Δ Gold Price > % Δ S&P, then “GOLD.” Else, S&P
•Partition Data
•Build and Evaluate
•Discuss Implications
Procedure and Methods
Key Models and Relationships Original Findings
+ Strong Clusters
+ NOT Time Sensitive
- Limited Range
v
Final Model
56.021
Validation Set Performance
Other Nuggets – Today
(April 2009)
(March 2009)
Other Nuggets - ClustersCluster Name Time
Period Major Event
1 “Panned Out” 1978 - 1982 Stagflation2 “Prospectors” 1983 - 1988 Ali Born5 “The Golden Era” 1989 - 1997 Berlin Wall Falls4 “Mine Kamph” 1998 - 2001 .dot Com Bubble and Y2K
3 “Gold Digs, to Brokety Broke” 2002 - 2008 Crisis from Authority
Other Nuggets – Gold September
Buy Gold?
Implications – Investment Strategy
Given: $1,000 in June 2009
Assumption – Economic Growth and Inflation will be Low
IF inflation is expected to be low, but not negative then invest in Gold
IF inflation is negative, invest in S&P
What We’d Do DifferentVariables
▫Output – ETFs, Portfolios
▫Inflation Expectations – TIPS
More
BibliographyWeb Articles
• http://goldnews.bullionvault.com/dow_gold_ratio_042920093
• http://goldnews.bullionvault.com/dow_gold_ratio_102220085
• “Consumer Expenditure Surveys.” US Bureau of Labor Statistics (BLS) Homepage. Accessed 2 April 2009. http://www.bls.gov/cex/#data
• “Economic Data--(FRED)®” Economic Research: Federal Reserve Bank of St. Louis. Accessed 2 April 2009. http://research.stlouisfed.org/fred2/
• “Historic Data for S&P 500 Stocks” Accessed 9 April 2009. http://biz.swcp.com/stocks/
• Ritter, John R. “Founding dates for 8,823 IPOs from 1975-2008.” IPO Data. October 2008. Accessed 9 April 2009. http://bear.cba.ufl.edu/ritter/FoundingDates.htm