Is Gold a Hedge against Stock Price Risk in U.S. or Indian Markets?
We study whether gold acts as a hedge or a safe haven in U.S. and the Indian stock markets. These two stock markets have been chosen as representatives of the developed markets and the emerging markets, respectively, and are of significant interest to long-term investors. We apply a linear regressio...
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| Format: | Article |
| Language: | English |
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MDPI AG
2021-09-01
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| Series: | Risks |
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| Online Access: | https://www.mdpi.com/2227-9091/9/10/174 |
| _version_ | 1797513184222904320 |
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| author | Hemant Manuj |
| author_facet | Hemant Manuj |
| author_sort | Hemant Manuj |
| collection | DOAJ |
| description | We study whether gold acts as a hedge or a safe haven in U.S. and the Indian stock markets. These two stock markets have been chosen as representatives of the developed markets and the emerging markets, respectively, and are of significant interest to long-term investors. We apply a linear regression and a GARCH technique to monthly return series data on the S&P500, the BSE Sensex, and gold prices. We find that, for the period of our study, 1980–2020, gold has not served as a hedge or a safe haven for long-term investors in the U.S. or Indian stock markets. This holds true even across multiple sub-periods in our study period. Gold returns do not exhibit a significant negative relationship with stock returns in any of the chosen stock market scenarios, i.e., in times of extremely low returns as well as in the periods of high or low volatility. Equity investors in U.S. and Indian markets can use the findings of this study for optimising their portfolios. Additionally, central bankers and policy makers can use the findings for better outcomes with respect to their policies on holding of gold. |
| first_indexed | 2024-03-10T06:13:06Z |
| format | Article |
| id | doaj.art-392e716063ab43f5b62148fd4c1a91f6 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-03-10T06:13:06Z |
| publishDate | 2021-09-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-392e716063ab43f5b62148fd4c1a91f62023-11-22T19:55:50ZengMDPI AGRisks2227-90912021-09-0191017410.3390/risks9100174Is Gold a Hedge against Stock Price Risk in U.S. or Indian Markets?Hemant Manuj0S P Jain Institute of Management & Research, Bhavan’s Campus, Munshi Nagar, Andheri West, Mumbai 400058, IndiaWe study whether gold acts as a hedge or a safe haven in U.S. and the Indian stock markets. These two stock markets have been chosen as representatives of the developed markets and the emerging markets, respectively, and are of significant interest to long-term investors. We apply a linear regression and a GARCH technique to monthly return series data on the S&P500, the BSE Sensex, and gold prices. We find that, for the period of our study, 1980–2020, gold has not served as a hedge or a safe haven for long-term investors in the U.S. or Indian stock markets. This holds true even across multiple sub-periods in our study period. Gold returns do not exhibit a significant negative relationship with stock returns in any of the chosen stock market scenarios, i.e., in times of extremely low returns as well as in the periods of high or low volatility. Equity investors in U.S. and Indian markets can use the findings of this study for optimising their portfolios. Additionally, central bankers and policy makers can use the findings for better outcomes with respect to their policies on holding of gold.https://www.mdpi.com/2227-9091/9/10/174goldstockshedgeportfolioIndia |
| spellingShingle | Hemant Manuj Is Gold a Hedge against Stock Price Risk in U.S. or Indian Markets? Risks gold stocks hedge portfolio India |
| title | Is Gold a Hedge against Stock Price Risk in U.S. or Indian Markets? |
| title_full | Is Gold a Hedge against Stock Price Risk in U.S. or Indian Markets? |
| title_fullStr | Is Gold a Hedge against Stock Price Risk in U.S. or Indian Markets? |
| title_full_unstemmed | Is Gold a Hedge against Stock Price Risk in U.S. or Indian Markets? |
| title_short | Is Gold a Hedge against Stock Price Risk in U.S. or Indian Markets? |
| title_sort | is gold a hedge against stock price risk in u s or indian markets |
| topic | gold stocks hedge portfolio India |
| url | https://www.mdpi.com/2227-9091/9/10/174 |
| work_keys_str_mv | AT hemantmanuj isgoldahedgeagainststockpriceriskinusorindianmarkets |