Title: Gold During Recessions: A study about how gold can improve the performance of a portfolio during recessions
In today’s (2008) financial turmoil, the market has changed dramatically during a short period of time. Starting with the subprime mortgage crisis with falling house prices in the US, the world market is today under pressure to recover. Seemingly, history will repeat itself because people with self-fulfilling goals drive the market. Investors have lost large shares of their portfolio investments and multinational companies and banks are struggling with their finances. The largest indexes all over the world have plummeted with 1-day record losses and the situation today is unstable, least to say.
Purpose:The purpose of this thesis is to look back at the historical price development of gold and DJIA during recessions in order to find out whether an inclusion of gold can improve a DJIA index portfolio held in today’s recession. In addition, by analyzing the risks and pos- sibilities with gold, the optimal allocation of gold in a DJIA portfolio will be investigated in.
Contents
3 Introduction
3.1 Background
3.2 Problem discussion
3.2.1 Research questions
3.3 Purpose
3.4 Approach
4 Frame of Reference
4.1 Economical theories and concepts
4.1.1 Business Cycles
4.1.2 Gold
4.1.2.1 Flow supply of gold
4.1.2.2 Demand of gold
4.1.2.3 Long Run
4.2 Financial theories
4.2.1 Uncertainty and Herd Behavior
4.2.2 Modern Portfolio Theory
4.2.2.1 Financial Statistical Section
4.2.2.2 Portfolio Theory Section
5 Historical Background
5.1 Dow Jones Industrial Average
5.2 Recessions
5.2.1 Recession 1 1973-11 – 1975-03
5.2.1.1 Price movement of Gold Recession 1
5.2.2 Recession 2 1980-01 – 1980-07 and Recession 3 1981-07 – 1982-11
5.2.2.1 Price movement of Gold Recession 2 – Recession 3
5.2.3 Recession 4 1990-07 – 1991-03
5.2.3.1 Price movement of Gold Recession 4
5.2.4 Recession 5 2001-03 – 2001-11
5.2.4.1 Price movement of Gold Recession 5
6 Method
6.1 Quantitative data collection
6.2 Deductive approach
6.3 Secondary data
6.4 Research process
6.5 Collection of data
6.6 Use of Data
6.7 Criticism and Delimitations
6.7.1 Assumptions
7 Results and Analysis
7.1 All time (1970 – 2008)
7.2 Recessions
7.2.1 Results and Analysis, Recession 1 (1973 – 1975)
7.2.2 Results and Analysis Recession 2 (1980 – 1980)
7.2.3 Results and Analysis, Recession 3 (1981 – 1982)
7.2.4 Results and Analysis Recession 4 (1990 – 1991)
7.2.5 Results and Analysis Recession 5 (2001 – 2001)
7.3 Comparison of gold with other assets
7.4 Conclusive analysis
8 Conclusion
8.1 Further studies
9 References
Author: Helmersson, Tobias,Kang, Hana,Sköld, Robin
Source: Jönköping University
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