Perspectives on Business Management, Economics & Information Technology (PBMEIT) Now also covers research on Psychology

PBME Volume III ISBN: 978-81-951151-1-2

A COMPARATIVE STUDY OF RELATIONSHIP OF GOLD ETFs WITH INDIAN CAPITAL MARKET INDEX AND EXCHANGE RATE

Author(s): ANKIT VERMA & ANU JAJOO

Abstract

The last few weeks have turned out to be a roller-coaster ride as we saw the COVID-19 pandemic intensify as it moved from China and engulfed most of the developed world. Apart from unprecedented policy actions like synchronized national lockdowns to counter the spread of the virus, and “do whatever it takes” monetary policies to cushion the economic disruption; we also witnessed global stock markets lost about a quarter of their value due to corona-driven panic selling. But Gold, like in past similar crises, had flourished. This paper empirically investigates the causal relationship of 3 Gold ETFs traded on NSE with Market Index (Nifty 200) and with the Exchange rate (USD to INR). An attempt has been made to study whether the relationship between variable change during the period of crisis. The period considered for the study is from January 2010 to September 2020 and this has been considered in 2 parts; the full period and during COVID-19 driven crises period. Techniques of time series analysis have been used to measure the causal relationship between the variables. The paper also tried to capture the performance trend of Gold ETFs in comparison to a stock market index and movement in the Exchange rate. Granger causality test applied on both the sub-periods provide reasonable evidence that indicates the existence of unidirectional causality running from INDEX and 3 Gold ETFs in the study during the crisis. However, no such causal relationship exists between the Gold ETFs and Exchange rate.

Keywords: Gold ETFs, Market index, Exchange Rate, Granger Causality test

JEL Classification: C22, G01, G1

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