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

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

The “Golden” Question ?????

Previous Research Dow/Gold Ratio Prior Economic Indicators of Performance

Dow/Gold Ratio

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

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

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

Key Models and Relationships Original Findings + Strong Clusters + NOT Time Sensitive - Limited Range v v

Final Model Validation Set Performance

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

Other Nuggets - Clusters ClusterNameTime PeriodMajor Event 1“Panned Out” Stagflation 2“Prospectors” Ali Born 5“The Golden Era” Berlin Wall Falls 4“Mine Kamph” dot Com Bubble and Y2K 3 “Gold Digs, to Brokety Broke” Crisis from Authority

Other Nuggets – Gold September

Different Ways to Visualize Data

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

Future Work

Bibliography Web Articles “Consumer Expenditure Surveys.” US Bureau of Labor Statistics (BLS) Homepage. Accessed 2 April “Economic Data--(FRED)®” Economic Research: Federal Reserve Bank of St. Louis. Accessed 2 April “Historic Data for S&P 500 Stocks” Accessed 9 April Ritter, John R. “Founding dates for 8,823 IPOs from ” IPO Data. October Accessed 9 April