A Study on Dynamic Relationship between Indian Gold Price and Sensex

Abstract

This paper examines the dynamic relationship between Gold price, and stock market returns with particular reference to Bombay stock market index (SENSEX) by using various time series econometric models from the period of almost 20 years from January 2000 to November 2019 (4903 daily observation). The study finds that there is a unidirectional relationship exists in between gold price and Sensex returns. This study witnessed there is a long-run equilibrium relationship between both the variables and they are moving together. The stock price can be used to predict the gold price in India. Hence, investors have the opportunity to reap the benefit of the portfolio diversification by gaining knowledge from this study.