Safe Haven Assets as a Mean for Loss Limitation for U.S. Household Portfolios in Times of Market Stress

Florian Köpf & Job Nouwens

Student thesis: Master thesis

Abstract

While the attention to safe haven studies increased steadily over the last 10 years, households have been neglected so far by other studies. The majority of related research focuses on the safe haven properties of a single asset. This study closes the gap between existing safe haven studies and household investing. We construct synthetic household portfolios consisting of risky assets, risk-free assets, real estate and human capital and we vary the portfolios by age of the household. After analyzing which asset serves as a safe haven on each individual portfolio component, we test the safe haven assets on the whole portfolios including and excluding human capital. This study tests the following assets as possible safe haven: gold, silver, copper, palladium, 10Y U.S. Treasury bond, 1Y U.S. Treasury bond, Euro, Swiss Franc and the Japanese Yen. Gold, both U.S. bonds and the Japanese Yen show the best safe haven properties against risky assets. The best safe haven qualities regarding real estate are shown by Euro, silver and gold. Considering human capital, silver and copper serve as the best safe haven. The best safe havens for portfolios excluding human capital across all age groups are gold, the Japanese Yen and both U.S. bonds. No consistent safe haven was found for portfolios including human capital whereas copper shows the best results amongst the tested assets.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages141