Table 3.7 gives data on gold prices, the Consumer Price Index (CPI), and the New York Stock Exchange (NYSE) Index for the United States for the period 1977-1991. The NYSE Index includes most of the stocks listed on the NYSE, some 1500 plus.
|
Year
|
Price of gold at New York,
$ per troy ounce
|
Consumer Price Index (CPI), 1982-84 = 100
|
New York Stock Exchange (NYSE) Index,
Dec. 31, 1965 = 100
|
|
1977
|
147.98
|
60.6
|
53.69
|
|
1978
|
193.44
|
65.2
|
53.70
|
|
1979
|
307.62
|
72.6
|
58.32
|
|
1980
|
612.51
|
82.4
|
68.10
|
|
1981
|
459.61
|
90.9
|
74.02
|
|
1982
|
376.01
|
96.5
|
68.93
|
|
1983
|
423.83
|
99.6
|
92.63
|
|
1984
|
360.29
|
103.9
|
92.46
|
|
1985
|
317.30
|
107.6
|
108.90
|
|
1986
|
367.87
|
109.6
|
136.00
|
|
1987
|
446.50
|
113.6
|
161.70
|
|
1988
|
436.93
|
118.3
|
149.91
|
|
1989
|
381.28
|
124.0
|
180.02
|
|
1990
|
384.08
|
130.7
|
183.46
|
|
1991
|
362.04
|
136.2
|
206.33
|
|
|
TABLE 3.7
a. Plot in the same scattergram gold prices, CPI, and the NYSE Index.
b. An investment is supposed to be a hedge against in?ation if its price and/or rate of return at least keeps pace with in?ation. To test this hypothesis, suppose you decide to ?t the following model, assuming the scatterplot in a suggests that this is appropriate:
Gold price t = β1 + β2 CPI t + ut
NYSE index t = β1 + β2 CPI t + ut