NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Sanjay P. Misra

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Working Papers

February 2013Gold Returns
with Robert J. Barro: w18759
From 1836 to 2011, the average real rate of price change for gold in the United States is 1.1% per year and the standard deviation is 13.1%, implying a one-standard-deviation confidence band for the mean of (0.1%, 2.1%). The covariances of gold’s real rate of price change with consumption and GDP growth rates are small and statistically insignificantly different from zero. These negligible covariances suggest that gold’s expected real rate of return—which includes an unobserved dividend yield—would be close to the risk-free rate, estimated to be around 1%. We study these properties within an asset-pricing model in which ordinary consumption and gold services are imperfect substitutes for the representative household. Disaster and other shocks impinge directly on consumption and GDP but not...

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