Performance Evaluation of Gold Exchange Traded Funds in India

Abstract

Gold is money, everything else is credit J P Morgan. Gold is an investment which unlike any other investment retains its value not only over the course of life of its investors but also beyond that. While gold is perceived as a stable investment option, the price is influenced by its supply and demand forces and consequently the price fluctuates like any other commodity. Indian investors who are averse to investing in other asset classes like stocks, mutual funds, insurance etc., view gold as the best investment option. While Indian investors yearn for investing in gold, the question arises whether the same gold can be held in electronic form as a mode of strategic investment. This research discusses the possibility of investing in gold in the form of Gold ETFs instead of real gold to meet the objectives of the investors. The researcher observes that while investment decisions are always backed by expected returns and risk, limited studies are available in the field of Gold ETFs, evaluating their performances on the basis of risk adjusted return. The researcher attempts to find out an appropriate model so that investors can evaluate the performances of Gold ETFs available in the market and take investment decisions, keeping in view their own objectives. newlineThe major finding of this research is: the risk adjusted returns (performances) of Gold ETFs are superior to the returns on investments in real gold and in stock market. The researcher recommends using Sharpe Ratio and/ or Jensen s Alpha to measure the performance of Gold ETFs in the context of investment decisions. newlineFinally, it is humbly concluded that the empirical evidences gathered and objective findings made through this research shall be helpful, in the future, to investors in making informed decisions on investments. newline*** newline newline