PORTFOLIO DIVERSIFICATION CONTRIBUTION OF PRECIOUS METAL: CASE OF BIST

The basic assumption of the modern portfolio theory is that adding of assets, which has low correlation between each other, to portfolio would reduce portfolio risk. This study investigates the contribution of gold to diversify stocks portfolio on Istanbul Stock Exchange (BIST) between April 1999- April 2018 periods Negative correlation between stocks and gold and negative beta coefficients for gold were found and this negative relationship increased during local and global shock periods. For this reason, it was understood that it is beneficial to diversify stock portfolio with gold and gold is safe haven for BIST investor. In fact, gold was added at different ratios to stocks portfolio and it was seen that risk of mixed portfolio decreased significantly and increased Sharpe ratio of it compared to stocks portfolio. In addition, losses of portfolios decreased significantly during crisis periods. Also, in this study the contribution of commodities to portfolio diversification was assessed and found that other precious metals, platinum and silver, may also contribute to stock portfolio diversification