the “golden” question ali alyabis andrew clark david lee s & p 500 gold? or
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The “Golden” Question
Ali AlyabisAndrew ClarkDavid Lee
S & P
500Gold?
or
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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
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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?
?????
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Previous Research
•Prior Economic Indicators of Performance
•Dow/Gold Ratio
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Our Hypothesis
EC
ON
OM
IC
EX
PEC
TATIO
NS
EC
ON
OM
IC
EX
PEC
TATIO
NS
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•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
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•Output: Binary: If %Δ Gold Price > % Δ S&P, then “GOLD.” Else, S&P
•Partition Data
•Build and Evaluate
•Discuss Implications
Procedure and Methods
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Key Models and Relationships Original Findings
+ Strong Clusters
+ NOT Time Sensitive
- Limited Range
v
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Final Model
56.021
Validation Set Performance
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Other Nuggets – Today
(April 2009)
(March 2009)
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Other Nuggets - ClustersCluster Name
Time Period
Major Event
1 “Panned Out” 1978 - 1982 Stagflation
2 “Prospectors” 1983 - 1988 Ali Born
5 “The Golden Era” 1989 - 1997 Berlin Wall Falls
4 “Mine Kamph” 1998 - 2001 .dot Com Bubble and Y2K
3“Gold Digs, to Brokety Broke”
2002 - 2008 Crisis from Authority
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Other Nuggets – Gold September
Buy Gold?
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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
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What We’d Do Different
Variables
▫Output – ETFs, Portfolios
▫Inflation Expectations – TIPS
More
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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