Gold investments however kind a major share of central banking institutions and governments’ Forex reserve portfolios. We question no matter if this large share is justified from a risk-return standpoint, though investigating the wide range of components that make this a challenging concern.
We make three contributions. Very first, we aim on how gold impacts portfolios formed purely of set profits assets, as these a lot more intently resemble people managed by central banks and governments in observe. Second, we analyse a wide range of risk-return measures, around and previously mentioned the normally used suggest-variance framework. 3rd, we go outside of the discussion of what is optimal for portfolios on common (as typically seen in the literature) to emphasis on what may possibly be ideal in extraordinary scenarios, ie at the tail of the chance distribution. This is of terrific desire to reserve supervisors.