The accompanying table gives a portion of data on gold prices, the Consumer Price Index (CPI), and the New York Stock Exchange (NYSE) Index for the United States for the period 1980–2010. The entire data set, labeled Gold_NYSE, can be found on the text website.

An investment is supposed to be a hedge against inflation if its price and/or rate of return at least keep pace with inflation. To test this assumption, suppose you decide to estimate the following models:
Gold = β0 + β1CPI + 
NYSE = β0 + β1CPI + 
Use goodness-of-it measures to determine which investment is a better hedge againstinflation.

  • CreatedJanuary 28, 2015
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