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Dynamic linkages between gold and equity prices: Evidence from Indian financial services and information technology companies

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  • Dey, Shubhasis
  • Sampath, Aravind

Abstract

We use multivariate GARCH models to analyze dynamic linkages between gold and equity price. A $1 long position in the NIFTY Financial Services index or in the NIFTY Information Technology index can be hedged for 12 cents and 5 cents, respectively, with a corresponding short position in spot gold. Moreover, spot gold expressed in rupees is a stronger equity hedge than spot gold expressed in dollars. Gold also acts as a safe haven asset during the Global Financial Crisis period. Crisis or not a prudent investor should allocate around 30% of her investable assets in gold within a gold/stock portfolio.

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  • Dey, Shubhasis & Sampath, Aravind, 2018. "Dynamic linkages between gold and equity prices: Evidence from Indian financial services and information technology companies," Finance Research Letters, Elsevier, vol. 25(C), pages 41-46.
    • Handle: RePEc:eee:finlet:v:25:y:2018:i:c:p:41-46
    DOI: 10.1016/j.frl.2017.10.002
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    6. Guanghui Yuan & Zhiqiang Liu & Yaqiong Wang & Dongping Pu, 2023. "Market Demand Optimization Model Based on Information Perception Control," Mathematics, MDPI, vol. 11(3), pages 1-16, February.
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    More about this item

    Keywords

    Spot gold; Stock; MGARCH; Correlation; Volatility spillovers;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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