Do Precious Metals Shine? An Investment Perspective

Posted: 23 May 2006

See all articles by Paul Draper

Paul Draper

University of Exeter

Robert W. Faff

University of Queensland

David Hillier

University of Strathclyde - Department of Accounting and Finance

Abstract

The investment role of precious metals in financial markets is investigated by analysis of daily data for gold, platinum, and silver from 1976 to 2004. All three precious metals have low correlations with stock index returns, which suggests that these metals may provide diversification within broad investment portfolios. Moreover, the data reveal that all three precious metals have some hedging capability, particularly during periods of abnormal stock market volatility. Financial portfolios that contain precious metals perform significantly better than standard equity portfolios.

Keywords: Alternative Investments, Commodities, Portfolio Management, Asset Allocation

Suggested Citation

Draper, Paul and Faff, Robert W. and Hillier, David, Do Precious Metals Shine? An Investment Perspective. Financial Analysts Journal, Vol. 62, No. 2, pp. 98-106, April 2006. Available at SSRN: https://ssrn.com/abstract=903774

Paul Draper

University of Exeter ( email )

Exeter EX4 4QX, Devon
United Kingdom

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

David Hillier (Contact Author)

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 330 4809 (Phone)
44 0141 330 4442 (Fax)

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