We show that the statistical properties of gold are negatively correlated with equities and that including gold in a portfolio will provide diversification benefits. As there is no consensus on the proportion of gold that should be included in a strategic portfolio allocation we propose a visual tool that associates a performance metric with a range of possible asset weighting schemes—a Sharpe ratio response surface. This very surface shows that a target performance metric can be achieved with a large number of different allocations. We further argue that the rebalancing approach based on the surface closest to the benchmark surface under the Hausdorrf distance metric should be selected. Using a data sample between 1990 and 2018, we find that annual rebalancing with a 44-week lookback period achieves the minimum distance from the benchmark surface.

What is the optimal weight for gold in a portfolio? / Lucey, B. M.; Peat, M.; Ševi´c, A.; Vigne, Samuel Alexandre. - In: ANNALS OF OPERATIONS RESEARCH. - ISSN 1572-9338. - 297:(2021), pp. 277-291. [10.1007/s10479-019-03496-5]

What is the optimal weight for gold in a portfolio?

Vigne, S. A.
2021

Abstract

We show that the statistical properties of gold are negatively correlated with equities and that including gold in a portfolio will provide diversification benefits. As there is no consensus on the proportion of gold that should be included in a strategic portfolio allocation we propose a visual tool that associates a performance metric with a range of possible asset weighting schemes—a Sharpe ratio response surface. This very surface shows that a target performance metric can be achieved with a large number of different allocations. We further argue that the rebalancing approach based on the surface closest to the benchmark surface under the Hausdorrf distance metric should be selected. Using a data sample between 1990 and 2018, we find that annual rebalancing with a 44-week lookback period achieves the minimum distance from the benchmark surface.
Gold, Portfolio formation, Asset allocation
What is the optimal weight for gold in a portfolio? / Lucey, B. M.; Peat, M.; Ševi´c, A.; Vigne, Samuel Alexandre. - In: ANNALS OF OPERATIONS RESEARCH. - ISSN 1572-9338. - 297:(2021), pp. 277-291. [10.1007/s10479-019-03496-5]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11385/222782
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