Abstract
This paper studies the exposure of Australian gold-mining firms to changes in the gold price, the stock market and the Australian dollar - US dollar exchange rate. The empirical analysis uses daily, weekly and monthly data of all gold-mining firms in the S&P/ASX All Ordinaries Gold Index for the period from January 1980 to December 2010 and finds that the average gold beta is 0.67 for gold denominated in US dollar and 0.38 for gold denominated in Australian dollars. The study also finds substantial variation of gold betas through time which indicates managerial flexibility and real optionality. Interestingly, the average exposure of the firms decreased in the recent gold bull market reducing the attractiveness of gold-mining firms relative to investments in bullion.
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