Financial Market Evidence of Gold's Unique Role in India
42 Pages Posted: 27 Jan 2022
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
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