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Cross–asset class portfolio between gold and stocks in Indonesia

Author

Listed:
  • Mesakh Prihanto Surya Putra
  • Apriani Dorkas Rambu Atahau
  • Robiyanto Robiyanto

    (Faculty of Economics and Business, Satya Wacana Christian University, Salatiga, Indonesia
    Faculty of Economics and Business, Satya Wacana Christian University, Salatiga, Indonesia
    Faculty of Economics and Business, Satya Wacana Christian University, Salatiga, Indonesia)

Abstract

This study observes the effectiveness of hedging by using the gold commodity futures instrument as a hedge asset towards Indonesian stock which is represented by sectoral indices and Composite Stock Price Index (CSPI). It uses DCC-GARCH which can dynamically accommodate the correlation between gold and the stock. This study finds that gold could become a safe haven asset towards stock in Indonesia. In addition, this study reveales that gold can effectively become a hedge asset for the stocks in Indonesia and the hedged portfolio resulted in a higher risk- adjusted performance of the portfolio of investment.

Suggested Citation

  • Mesakh Prihanto Surya Putra & Apriani Dorkas Rambu Atahau & Robiyanto Robiyanto, 2018. "Cross–asset class portfolio between gold and stocks in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 10(1), pages 69-81, April.
    • Handle: RePEc:uii:journl:v:10:y:2018:i:1:p:69-81
    DOI: 10.20885/ejem.vol10.iss1.art8
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    References listed on IDEAS

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    3. Yuan-Hung Hsu Ku & Ho-Chyuan Chen & Kuang-Hua Chen, 2007. "On the application of the dynamic conditional correlation model in estimating optimal time-varying hedge ratios," Applied Economics Letters, Taylor & Francis Journals, vol. 14(7), pages 503-509.
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    5. El Hedi Arouri, Mohamed & Lahiani, Amine & Nguyen, Duc Khuong, 2015. "World gold prices and stock returns in China: Insights for hedging and diversification strategies," Economic Modelling, Elsevier, vol. 44(C), pages 273-282.
    6. Capie, Forrest & Mills, Terence C. & Wood, Geoffrey, 2005. "Gold as a hedge against the dollar," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(4), pages 343-352, October.
    7. Silvo Dajcman & Mejra Festic & Alenka Kavkler, 2012. "European stock market comovement dynamics during some major financial market turmoils in the period 1997 to 2010 -- a comparative DCC-GARCH and wavelet correlation analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 19(13), pages 1249-1256, September.
    8. Jobson, J D & Korkie, Bob M, 1981. "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance, American Finance Association, vol. 36(4), pages 889-908, September.
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    Citations

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    Cited by:

    1. Robiyanto Robiyanto & Michael Alexander Santoso & Apriani Dorkas Rambu Atahau & Harijono Harijono, 2019. "The Indonesia Stock Exchange and Its Dynamics: An Analysis of the Effect of Macroeconomic Variables," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 15(4), pages 59-73.
    2. Robiyanto Robiyanto & Rihfenti Ernayani & Rendi Susiswo Ismail, 2019. "Formulation Of A Dynamic Portfolio With Stocks And Fixed-Income Instruments In The Indonesian Capital Market," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 10(1).

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    More about this item

    Keywords

    Cross-asset class portfolio; DCC-GARCH; Hedging effectiveness; Risk-adjusted return;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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