Description
Title: The DCC-GARCH Approach for Determining the Impact of Gold on Sustainable Investment in Indonesia
Abstract: The performance of a dynamic portfolio made up of sustainably produced/ethically sound stocks and gold was examined in this study. The main goal of this study is to demonstrate that adding gold to portfolios of sustainable or ethical stocks could improve performance. Therefore, the DCC-GARCH method used in this research relaxed the fundamental assumptions in the theory of modern portfolio, which is based on the assumption that securities would have constant correlation and that stock returns would be normal. SRI-KEHATI Index (SKI) and Jakarta Islamic Index (JII) data from Indonesia were used in this study as proxies for sustainable investments. In addition, gold was used in this study between 2013 and 2019. This study can offer proof that a dynamic portfolio can reduce portfolio risk to a reasonable level. This resulted in a lower rate of return, though. Gold is shown to be a weak safe haven for sustainable investment in Indonesia based on the OLS regression. When creating a portfolio, investors who adhere to ethical investing principles may include gold to significantly lower risk. The addition of gold to portfolios may result in effective hedging. Overall, this study confirms some earlier findings about the potential of gold as a tool to lower investment risk if included in a portfolio.
Keywords: sustainable investment; diversifier; safe haven; hedge; Indonesia stock exchange
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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