Scattergram and Hedge Against

Inflation Analysis of Consumer Price

Index, Price of Gold and New York
Stock Exchange Index
Tahun CPI Price of Gold NYSE
1977 60.6 147.98 53.69
1978 65.2 193.44 53.70
1979 72.6 307.62 58.32
1980 82.4 612.51 68.10
1981 90.9 459.61 74.02
1982 96.5 376.01 68.93
1983 99.6 423.83 92.63
1984 103.9 360.29 92.46
1985 107.6 317.30 108.90
1986 109.6 367.87 136.00
1987 113.6 446.50 161.70
1988 118.3 436.93 149.91
1989 124.0 381.28 180.02
1990 130.7 384.08 183.46
1991 136.2 362.04 206.33
The following table gives data on gold prices, the consumer price index (CPI), and the
New York Stock Exchange (NYSE) index for the United State for the period 1977-1991
a. Plot the same scattergram gold prices, CPI, and the NYSE Index
b. An investment is supposed to be a hedge against inflation if its price and or return at
least keeps pace with inflation. To test this hypothesis, suppose you decide to fit the
following model, assuming the scatterplot in (a) suggest that is appropriate:
Gold pricet = 1 + 2CPIt + ut
NYSE Indext= 1 + 2CPIt + ut
If the hypothesis is correct what value of 2 would you expect ?
c. Which is a better hedge against inflation, gold or the stock market?