The Role of Gold and the VIX in Investment Portfolios – A Financial and Sustainability Perspective

24 Pages Posted: 14 Nov 2017

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Josua Oll

University of Hamburg

Date Written: September 2017

Abstract

This paper analyzes and contrasts the diversification benefits of gold and the volatility index VIX from a financial and sustainability perspective. We operationalize sustainability by means of carbon emissions and show that the addition of gold or the VIX to a diversified equity portfolio can reduce the portfolio’s carbon emissions per US dollar value and thus enhance the sustainability of the portfolio. Since gold is only mined once and does not involve recurring emissions, gold’s sustainability performance increases the longer the portfolio is held. Derivatives, including the VIX, reduce a portfolio’s carbon emissions per US dollar value even more because carbon emissions only occur at the underlying firm level and cannot be double-counted. Our study highlights the critical role of physical assets and derivatives in the sustainability analysis of investment portfolios.

Keywords: gold; sustainability; VIX; carbon emissions

JEL Classification: G11; Q01; Q02

Suggested Citation

Baur, Dirk G. and Oll, Josua, The Role of Gold and the VIX in Investment Portfolios – A Financial and Sustainability Perspective (September 2017). Available at SSRN: https://ssrn.com/abstract=3069283 or http://dx.doi.org/10.2139/ssrn.3069283

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Josua Oll

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

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