Plot in the same scattergram gold prices, cpi

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Reference no: EM13882177

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

Reference no: EM13882177

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