Gold characteristics as safe haven and assets diversification for Sharia stocks in Indonesia

• Published in: Journal of Islamic Accounting and Business Research
• Main Author: Rusmita S.A.; Filianti D.; Mayasani E.N.; Samad K.A.
• Format: Article
• Language: English
• Published: Emerald Publishing 2024
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85197464078&doi=10.1108%2fJIABR-11-2021-0302&partnerID=40&md5=74d5863fbeadc17b7daed5ce7932471d

Purpose: This study aims to determine the role of gold as a safe haven, hedge and asset diversification for Shariah stock in conditions of extreme stock market declines. Design/methodology/approach: Quantitative approach is used by applying the threshold generalized autoregressive conditional heteroskedasticity (TGARCH) model to capture bad or good news in the market condition and quantile regression method to obtain the extreme values of stock returns in several market conditions. The data used were the daily closing price of gold and the Jakarta Islamic Index from January 2011 to October 2022. Findings: The average conditions show gold does not have a hedge property and only acts as an asset diversification. Second, gold has a substantial, safe haven property in every economic condition. However, the safe-haven property of gold seemed to weaken during the most extreme stock market decline. Thus, although gold appears as a safe haven and asset diversification, it remains a risky investment and only provides a minor role in the face of the extreme stock market period. Practical implications: This research provides a discourse and literature for Islamic investors and investor managers to choose the right investment instrument in various economic conditions where gold has a function as diversification and safe haven in their asset portfolio under any other asset portfolio conditions which is also in line with modern portfolio theory. For policymakers, the study can be used as material for consideration in making policies related to the accessibility of gold as an investment instrument. Originality/value: This study presents the originality by using the price of Antam gold as a proxy for gold investment during the latest research year data and focusing on case studies in Islamic capital market in Indonesia. Moreover, this research provides quantile regression that sharply discussion in various economics condition. © 2024, Emerald Publishing Limited.