Safe haven, hedge and portfolio analysis of precious metals in Nordic stock markets

This thesis is a comprehensive look at the qualities of precious metals and their attributes on investing in Nordic stock markets. The thesis concentrates to study whether precious metals serve as hedges or safe havens in Nordic stock markets during the study period from January 1999 to January 2015. The other main purpose of the study is to test what gain an investor in Nordic markets can achieve by introducing precious metals as a part of an investment portfolio. Commodities are in growing demand as real assets for variety of purposes they serve and as investment assets for investors they have new opportunities to gain profits during different real economy and financial market situations. Precious metals stand out from other commodities in being a group of metals with unique qualities on investing. The main precious metals are a group of four metals: gold, silver, platinum and palladium, which all have an international currency code. Besides being approved as currency, they have a distinct quality of being both investment and industrial assets. For an investor precious metals’ quality of having very low correlation with equity indexes can be a very valuable quality. Precious metals have varying correlations with each other, thus an effectively diversificated investment portfolio can be built by investing only in precious metals. With a regression model including 1%, 2.5% and 5% lower quantiles of the worst stock returns in the Nordic stock markets, each precious metal is regressed. The results show that gold acts as a hedge and safe haven in all of the Nordic stock markets. Silver also acts as a hedge in half and safe haven in all of the Nordic stock markets. In the portfolio analysis the relative efficiency improvement of a Nordic stock portfolio is analyzed by using different weights of each precious metal in the stock portfolio during the study period. There is a significant improvement for the risk adjusted return of each Nordic stock market gained by investing part of the portfolio to a precious metal or in equal weight to all of the precious metals.fi=Opinnäytetyö kokotekstinä PDF-muodossa.|en=Thesis fulltext in PDF format.|sv=Lärdomsprov tillgängligt som fulltext i PDF-format