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The “Golden” Question

or. The “Golden” Question. Gold?. S & P 500. 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 Possible Applications

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The “Golden” Question

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  1. or The “Golden” Question Gold? S & P 500 Ali Alyabis Andrew Clark David Lee

  2. 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 • Possible Applications • Future Work

  3. 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? ?????

  4. Previous Research • Dow/Gold Ratio • Prior Economic Indicators of Performance

  5. Dow/Gold Ratio

  6. Our Hypothesis • We expect it will be better to hold gold during recessions or when the macroeconomic components are otherwise down. • When macroeconomic are favorable we expect stock prices to be higher

  7. Procedure and Methods • 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

  8. Procedure and Methods • Determine Output Variable: • S&P or Gold [Binary (0,1)]: If monthly % Growth Rate of Gold Price > monthly % Growth Rate of S&P 500 then 1. If not, then 0. • Partition Data • Build Models • C&RT • K-Means • Anomaly • Logistic Regression • Discriminant • Evaluate Models

  9. Key Models and Relationships Original Findings + StrongClusters +NOT Time Sensitive - Limited Range v

  10. Final Model

  11. Final Model – (March 2009) (April 2009)

  12. Key Models and Relationships

  13. Different Ways to Visualize Data

  14. Implications – Investment Strategy • Assumption – June 2009: 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 • Disclaimer: Be wary of Unprecedented Times

  15. Future Work

  16. Bibliography Web 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

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