An empirical study on gold etf volatility – Evidence from Indian market

Price risk is the major risk faced by all investors. Although price risk specific to an underlying can be minimized through diversification, market risk cannot be diversified away. Price risk depends on the volatility of the underlying held within a portfolio. In this study an attempt has been made to test the volatility of Gold ETF in India. Sample 14 listed Gold ETFs of NSE were taken to measure the volatility. The study also investigates the price risk associated due to inter correlation factors which are undiversifiable. Annualized Actual Volatility (AAV) model is used to calculate volatility and t test is computed for significance. GOLDBEES, GOLDSHARE, KOTAKGOLD, RELGOLD, SBIGETS have highest (significant at 1%) price volatility as compared to other counterparts and poses higher price risk to the investors. AXIS, HDFCMFGETF, IPGETF, QGOLDHALF, RELIGAREGO have moderate price volatility at 5% significance level. Interestingly, BSLGOLDETF, IDBIGOLD, MGOLD, CRMFGETF have least insignificant volatility and indicate the least price risk among the samples ETF. The correlation among these samples Gold ETF is positive except in case of CRMFGETF. Knowing the volatility helps in deciding possible range of values that an underlying will be in and when an investor knows how much volatility he is exposed to, he can make informed decisions on his investments.