Zusammenfassung
Gold has similar expected returns and risk properties as stocks. The Sharpe ratio maximising allocation of gold in addition to diversified German stock portfolios varies between 42% and 75%. When tilting away from the market portfolio among firm-characteristics, hedge-based considerations suggest to increase the gold ratio when the underlying stock portfolio is riskier. As the correlation between ...
Zusammenfassung
Gold has similar expected returns and risk properties as stocks. The Sharpe ratio maximising allocation of gold in addition to diversified German stock portfolios varies between 42% and 75%. When tilting away from the market portfolio among firm-characteristics, hedge-based considerations suggest to increase the gold ratio when the underlying stock portfolio is riskier. As the correlation between monthly returns of both asset classes is close to zero in Germany, we find that investors can maximize the Sharpe ratio by decreasing the gold weight in more riskier portfolios and vice versa.