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The “Golden” Question

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

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The “Golden” Question

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  1. or The “Golden” Question S & P 500 Gold? 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 • Investment Implication

  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 • Prior Economic Indicators of Performance • Dow/Gold Ratio

  5. Our Hypothesis

  6. 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

  7. Procedure and Methods • Output: Binary: If %Δ Gold Price > % Δ S&P, then “GOLD.” Else, S&P • Partition Data • Build and Evaluate • Discuss Implications

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

  9. Final Model Validation Set Performance

  10. Other Nuggets – Today (March 2009) (April 2009)

  11. Other Nuggets - Clusters

  12. Other Nuggets – Gold September Buy Gold?

  13. 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

  14. What We’d Do Different Variables • Output – ETFs, Portfolios • Inflation Expectations – TIPS More

  15. 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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