Empirical Study In Risk Diversification In Stock And Futures Of Gold Asset Allocation

Gold, together with stocks, futures, bonds and foreign exchange are the main varieties and key constitution of the world financial market investment instruments. Under the complex multilateral world political and economic circumstances, gold is favored for its significant intrinsic value and risk-hedging features by both institutions and individuals. In pace with gold's de-currency process, its investment market has developed maturely. Investors could achieve their purpose in financial freedom by participating in variety of gold business via multiple gold futures, spots, stocks in different markets. This thesis intends to build an efficient portfolio by theoretical study on gold futures and stocks, plus empirical study on same factors'influence on the different gold assets, to provide investors with gold investment suggestions.Under Markowitz's Portfolio Theory frame, this thesis first analyzes the fundamental of allocation and investment on gold assets by choosing gold futures and gold stocks as research objects. It conducts a theoretical study on the correlation of these two assets'volatility to conclude a feasible diversification in the assets'non-systematic risk. Then this thesis looks for the gold assets portfolio's efficient frontier, thus locates the optimal risk-adjusted portfolio weight and capital market line under the risk-free rate restriction.Secondly, this thesis uses multiple regression analyses to build models that rely gold futures price and stock prices on US macroeconomic factors, global gold demand and supply and related markets. It conducts an empirical research on the significance of these same factos onto different assets both directionally and quantitatively, further explains the reason of divergence of the two asset price.Based on above study, the fourth part of this thesis builds a portfolio consists with risk free assets, gold futures and gold stocks. Comparing the portfolio's Sharpe ratio with each single asset's, it concludes that the portfolio's risk-adjusted performance is better than any single asset in the long run. The conclusion that portfolio's risk-return is optimized again proves the theoretical analysis of this thesis.The last chapter provides investors, governments and institutions with suggestion according to the theoretical and empirical study.