Financial Market Evidence of Gold's Unique Role in India

42 Pages Posted: 27 Jan 2022

See all articles by Dirk G. Baur

Dirk G. Baur

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

Balagopal Gopalakrishnan

Indian Institute of Management Ahmedabad

Sanket Mohapatra

Indian Institute of Management Ahmedabad

Abstract

Gold plays an important cultural role in India. This paper studies whether this role is also reflected in the link between stock prices and the price of gold, i.e. do stock prices react to changes in the price of gold, and if so, which sectors and firms react more than others? The empirical analysis of 125 sectors and 500 stocks reveals that most Indian stocks do not react to changes in the price of gold except those that are linked to consumer sentiment such as retail stocks and retail finance stocks. We hypothesize that a golden wealth effect is the source of this finding. Similar analyses for other countries where gold plays a different role such as Australia and Turkey confirm the unique results for India and demonstrate a significant financial role of gold.

Keywords: gold, India, Culture

Suggested Citation

Baur, Dirk G. and Gopalakrishnan, Balagopal and Mohapatra, Sanket, Financial Market Evidence of Gold's Unique Role in India. Available at SSRN: https://ssrn.com/abstract=4019314 or http://dx.doi.org/10.2139/ssrn.4019314

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

Balagopal Gopalakrishnan

Indian Institute of Management Ahmedabad ( email )

D-1508 IIM Old campus
Vastrapur
Ahmedabad, 380015
India

Sanket Mohapatra

Indian Institute of Management Ahmedabad ( email )

Wing 1-F, IIM Old Campus
Vastrapur
Ahmedabad, 380015
India

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