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Gold as an investment opportunity

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Fransen, Simon ULiège
Promotor(s) : Depraetere, Pascal ULiège
Date of defense : 23-Jun-2016/28-Jun-2016 • Permalink : http://hdl.handle.net/2268.2/1267
Details
Title : Gold as an investment opportunity
Translated title : [fr] L'or comme opportunité d'investissement
Author : Fransen, Simon ULiège
Date of defense  : 23-Jun-2016/28-Jun-2016
Advisor(s) : Depraetere, Pascal ULiège
Committee's member(s) : Hübner, Georges ULiège
Dallemagne, Patrick 
Language : English
Number of pages : 75
Keywords : [en] gold
[en] gold market
[en] investing in gold
[en] safe haven
[en] portfolio diversification
[en] risk and return.
Discipline(s) : Business & economic sciences > Finance
Institution(s) : Université de Liège, Liège, Belgique
Degree: Master en sciences de gestion, à finalité spécialisée en Financial Analysis and Audit
Faculty: Master thesis of the HEC-Ecole de gestion de l'Université de Liège

Abstract

[en] Over the centuries, gold always occupied an important place in the history of humanity. Today, gold is still considered as a rare metal, as a raw material but also as a financial asset. Indeed, during the last 15 years gold has become a very popular investment thanks to the introduction of new vehicles allowing an investor to be indirectly exposed to the precious metal market such as gold ETFs, mutual funds and gold mining shares. This sudden interest for the yellow metal was also fostered by the recent financial crisis that has shaken the financial markets and by the necessity for portfolio managers to find new investment opportunities in "uncorrelated" assets which provide consistent performance in all market conditions. Therefore, this thesis examines the extent to which gold can still nowadays be considered as a good investment opportunity for an investor. The objective of this work is therefore to provide an answer to three main questions which are: Can gold still be considered as a safe haven? To what extent can gold be used as a portfolio diversification tool? Which type of gold investment would be recommendable for this purpose? Answers to these questions were obtained by using various descriptive statistics together with the concepts of the Modern Portfolio Theory introduced by Harry Markowitz (1952). It was therefore demonstrated that physical gold can indeed be considered as a safe haven asset to the extent that its correlation with equities and its systematic risk measured by the beta are becoming very low in times of crisis. However, the same conclusions could not been drawn from paper gold related investments. In terms of diversification potential, it was identified that gold and particularly physical gold investments are useful tools for diversification purpose since in all time periods studied, they are almost always included in efficient portfolios and systematically present in the Minimum Variance, Optimal Sharpe and Sortino portfolios. Moreover, thanks to the efficient frontier, it was shown that gold investments allow investors in general to have access to more efficient portfolios for which they can obtain higher performance for a given level of risk. Finally, it was also identified that silver can acts as a close substitute to gold even if this metal should never be chosen above gold.


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Author

  • Fransen, Simon ULiège Université de Liège > Master sc. gest., fin. spéc. fin. analysis & aud (ex 2e ma.)

Promotor(s)

Committee's member(s)

  • Hübner, Georges ULiège Université de Liège - ULg > HEC-Ecole de gestion de l'ULg : UER > Gestion financière
    ORBi View his publications on ORBi
  • Dallemagne, Patrick CBC Banque
  • Total number of views 115
  • Total number of downloads 23










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