Analyzing Gold Returns: Indian Perspective

PIBM Journal of Management, Vol 3

14 Pages Posted: 13 May 2019

See all articles by Abha Moradia

Abha Moradia

G. H. Patel Institute of Business Management, Sardar Patel University

Ashish C. Mehta

Sardar Patel University, G. H. Patel Post Graduate Institute of Business Management

Date Written: August 2, 2018

Abstract

Investors are forever in need of an asset that adds value to the portfolio. Therefore, along with fixed income investments, stocks, gold and other assets are inevitable parts of a balanced portfolio. For Indian investors, gold is not only an investment asset but a commodity with a major importance in the social customs that makes it all the more interesting to study. As an investment asset, it is considered a diversifier asset and a hedging asset. Not only that, it is called a ‘safe-haven’ asset for times of economic distress, meaning that it retains its value when the stock market is giving low or negative returns. In this paper, we analyze the risk-return parameters of both the gold and Sensex for a period from 1992 to 2017 and find out how they perform along with each other. We also do detailed subperiod analysis in terms of Pearson’s correlation coefficient and see how it changes in pre-recession and post-recession period. We analyze whether gold is a diversifier asset, a hedge, a safe haven or all three for Indian investors. It is interesting to note how the exchange rate variability has a great impact on gold’s rate of return.

Keywords: gold, stock market, risk-return, correlation coefficient, hedge, safe-haven asset

JEL Classification: G1, G10, G11

Suggested Citation

Moradia, Abha and Mehta, Ashish C., Analyzing Gold Returns: Indian Perspective (August 2, 2018). PIBM Journal of Management, Vol 3, Available at SSRN: https://ssrn.com/abstract=3368240

Abha Moradia (Contact Author)

G. H. Patel Institute of Business Management, Sardar Patel University ( email )

Vallabh Vidyanagar
Gujarat, Gujarat 388120
India
02692 248463 (Phone)

Ashish C. Mehta

Sardar Patel University, G. H. Patel Post Graduate Institute of Business Management ( email )

Anand, 388001
India

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