Analyses of the impact of country specific macro risk variables on gold futures contract and its position as an asset class: evidence from India

Rupel Nargunam (Department of Statistical Science, Temple University, Philadelphia, Pennsylvania, U.S.A.; and Department of Mathematics and Actuarial Science, B. S. Abdur Rahman Crescent Institute of Science and Technology, Chennai, India)

William W. S. Wei (Department of Statistical Science, Temple University, Philadelphia, Pennsylvania, U.S.A.)

N. Anuradha (Department of Management Studies, B. S. Abdur Rahman Crescent Institute of Science and Technology, Chennai, India)

Abstract

This paper discusses the dependence of gold futures prices on macro risk factors using a multiple linear regression model. Recently introduced uncertainty indexes such as geopolitical risk index and economic policy uncertainty index are included in this study. We also examine the investment nature of gold futures contract among other assets. The results provide insights on the influence of these interrelated macro economic variables on a financial derivative contract in an emerging economy and its unique position in portfolio allocation and are aimed to help practitioners and policy makers.

Keywords

gold futures contract, macro risk factors, multiple linear regression, investment nature

2010 Mathematics Subject Classification

Primary 62M10, 62-xx. Secondary 91B84.

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The research of the first author was supported by the Fulbright-Nehru Doctoral Research program (Award No. 2447/DR/2019-2020).

Received 1 August 2020

Accepted 16 August 2022

Published 28 December 2022