A study on performance of various gold funds

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Table of Contents CHAPTER 1 .............................................................................................................................. 4

INTRODUCTION ................................................................................................................. 4

1.1 STATEMENT OF THE PROBLEM ........................................................................... 6

INDUSTRY PROFILE .......................................................................................................... 6

1. Bombay Stock Exchange: .............................................................................................. 7

2. National Stock Exchange (NSE):................................................................................... 7

3. Other stock exchanges in India ...................................................................................... 9

4. Stock market regulation. .............................................................................................. 10

5. Securities and Exchange Board Of India (SEBI) ......................................................... 10

COMPANY PROFILE ........................................................................................................ 12

1.2 RESEARCH METHODOLOGY................................................................................... 18

1.21 OBJECTIVES .......................................................................................................... 18

1.2.2 METHODOLOGY OF THE STUDY .................................................................... 19

1.2.3 RESEARCH DESIGN ............................................................................................ 19

1.2.4 STATISTICAL ANALYSIS TOOLS USED ......................................................... 19

1.2.5 PERIOD OF THE STUDY ..................................................................................... 21

1.2.6 DATA SOURCES .................................................................................................. 21

Primary Data .................................................................................................................... 21

1.3 SIGNIFICANCE OF STUDY ................................................................................... 22

1.4 LIMITATION OF THE STUDY ............................................................................... 22

1.5 CHAPTERIZATION ................................................................................................. 22

CHAPTER 2 ............................................................................................................................ 23

LITERATURE REVIEW .................................................................................................... 23

2.1 ETFs’ Performance Across Countries ....................................................................... 23

2.2 Mutual Fund Performance in India ............................................................................ 25

2.3 Gold ETF Overview ................................................................................................... 29

2.4 The Status of the Global Gold ETF ........................................................................... 30

References ................................................................................................................................ 32

CHAPTER 3 ............................................................................................................................ 34

DATA COLLECTION AND ANALYSIS .......................................................................... 34

BIRLA SUN LIFE GOLD ETF ....................................................................................... 34

CANARA ROBECO -GOLD ETF .................................................................................. 36

GOLDMAN SACHS ....................................................................................................... 38

HDFC GOLD ETF ........................................................................................................... 40

ICICI GOLD ETF ............................................................................................................ 42

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IDBI GOLD ETF ............................................................................................................. 44

QUANTUM GOLD FUND ............................................................................................. 46

KOTAK GOLD ETF ....................................................................................................... 48

RELIANCE GOLD FUND .............................................................................................. 50

SBI GOLD FUND ........................................................................................................... 52

CORRELATION CO-EFFICIENT ..................................................................................... 54

CORRELATION CO-EFFICIENT OF STOCK RETURN AND MARKET RETURN 55

TREND RATIO ................................................................................................................... 65

BIRLA SUN LIFE GOLD ETF ....................................................................................... 65

CANARA ROBECO -GOLD ETF .................................................................................. 67

GOLDMAN SACHS ....................................................................................................... 69

HDFC GOLD ETF ........................................................................................................... 71

ICICI GOLD ETF ............................................................................................................ 73

IDBI GOLD ETF ............................................................................................................. 75

QUANTUM GOLD FUND ............................................................................................. 77

KOTAK GOLD ETF ....................................................................................................... 79

RELIANCE GOLD FUND .............................................................................................. 81

SBI GOLD FUND ........................................................................................................... 83

PERFORMANCE RANKING............................................................................................. 85

SHARPE RATIO ANALYSIS ........................................................................................ 85

TREYNOR RATIO ANALYSIS ......................................................................................... 88

JENSEN INDEX .................................................................................................................. 91

CHAPTER 4 ............................................................................................................................ 96

FINDINGS ........................................................................................................................... 96

SUGGESTIONS .................................................................................................................. 98

CHAPTER 5 ............................................................................................................................ 99

CONCLUSION .................................................................................................................... 99

References .............................................................................................................................. 100

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CHAPTER 1

INTRODUCTION

Gold was first discovered as shining, yellow nuggets. "Gold is where you find it," so the

saying goes, and gold was first discovered in its natural state, in streams all over the world.

No doubt it was the first metal known to early hominids. Gold became a part of every human

culture. Its brilliance, natural beauty, and luster, and its great malleability and resistance to

tarnish made it enjoyable to work and play with.

There are lots of ways to go about investing in gold. Gold has shown to be quite a solid

investment for many years. It is one of those investments where people are happy they

elected for it most of the time. Even people who have never invested in anything in their lives

are putting their money in gold. They are driven by many different reasons to preserve their

wealth in this fashion. They can choose from any one of a number of different ways to invest

in this precious metal. Plenty of people choose to invest their money in diverse fashions so

that they can take advantage of the benefits of gold as well as the safety it provides.

The gold exchange traded fund is a burgeoning product to invest in gold. It has very positive

significance as foreign exchange, financial safety and avoiding inflation to a country. At the

same time, it is convenient to invest in gold exchange traded funds for small and medium-

sized investors and extremely welcomed by market. However, most of the investors don’t

understand gold exchange traded funds. Exchange-Traded Funds (ETFs) were first

introduced in USA in 1993. About 60% of trading volumes on the American Stock Exchange

are reported to be from ETFs. ETFs are referred to as passive schemes that fund managers

resort to, to avoid risk and offer low-cost options to the investors. These funds rely on an

arbitrage mechanism to maintain the prices at which they trade, in line with the net asset

values of their underlying portfolios.

Exchange Traded funds (ETFs) are open ended index funds that are listed and traded on

exchanges like stock equity based on the price of metal. The first bonafide ETF was launched

in US in 1993, a tradable depositary receipt for a portfolio of index stocks held in a unit

investment trust. It was called the S&P Depositary Receipt, and it also tracked the S&P 500

Stock Index .The concept of Exchange-Traded Funds (ETFs) is very popular in foreign

countries, but in India, it is still in the initial growth phase. As Exchange-Traded Funds

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started growing in India since 2006, the investment industry required performance analysis of

this newly available financial asset. Moreover, fund selection also requires investors to

analyze returns, volatility and performance of the available funds.

Performance of ETFs has been examined on the basis of their returns and risk characteristics.

On an average in India, ETFs grew at 37% annually during 2006 -2011. These funds also

generated excess returns of 3% p.a. as against CNX NIFTY, the Indian equity market’s bench

mark. Gold ETFs provided 13% excess returns as compared to the returns on the equity

market and attracted large investments in the post financial crisis years. In India, as on 31st

May 2011, there are 25 large funds which represent the most recent gold funds as well as

overseas fund of funds. The efficient funds were not found to be the large funds; however,

they offered higher returns and have higher Sharpe ratios.

According to the Association of Mutual Funds of India (AMFI) data, the Indian mutual fund

(MF) industry has been holding Rs. 6.75 trillion worth of assets over the past decade. On an

average, during 2006-2011, Indian ETFs comprised of only 1.4% of the total industry assets.

In comparison, in the US, ETFs comprise about 9% of the MF industry. This trend often

raises the query among the investors as to whether or not Exchange-Traded Funds (ETFs)

will be able to perform well in India. In 2001, Benchmark was the first company to launch

the first ETF in India - Nifty BeES, which was listed on the NSE for trade. In 2007,

Benchmark also launched the first Gold Exchange-Traded Fund. The growth rate in ETFs

was found to be higher than the industry growth rate during 2006 - 07. However, ETFs did

not continue to grow at that pace in the post financial crisis period. While in 2006-07, the

share of ETFs in the total industry was about 3%, it fell subsequently and the average is

around 1.4%.

Gold ETFs have gained greater significance as successful mean of investment in the last

decade. The recent global financial crisis increased the demand for gold hedge. The major

data of the world seven largest gold ETFs indicates that, the total holdings of the world's

seven largest golden ETFs are 1383.8 tons. The gold ETF (exchange-traded index funds)

provides a convenient way to the investors to intervene in the gold market. The purpose of

this study was to analyze the performance of ETFs in financial market, particularly the Gold

ETFs. The study is designed to serve as a tool for investors searching the opportunities in

gold ETFs.

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1.1 STATEMENT OF THE PROBLEM

Gold commodity exchange traded funds are a simple way to expose your investment strategy

to the performance of gold, without actually owning any gold products. There are many types

of gold ETFs. Often investors encounters difficulty to take apt investment decision in gold

fund. It is seen that investors fail to select proper gold fund for their portfolio .This study

aims to suggest suitable methods and evaluation for selecting proper gold fund for their

portfolio.

INDUSTRY PROFILE

The purpose of a stock exchange is to facilitate the exchange of securities between buyers

and sellers, thus providing a marketplace. it is important just like the networks for transport,

electricity and telecommunications function properly so is it essential that, for example,

payments can be transacted, capital can be saved and channeled to the most profitable

investment projects and that both households and firms get help in handling financial

uncertainty and risk as well as possibilities of spreading consumption over time. Financial

markets constitute an important part of the total infrastructure for every society that has

passed the stage of largely domestic economies The financial system performs three main

tasks: first, it handles transfer of payments; second, it channels savings to investments with a

good return for future consumption; and third, it spreads and reduces economic risks in

relation to the players targeted returns. The stock market is one of the most important sources

for companies to raise money. Experience has shown that the price of shares and other assets

is an important part of the dynamics of economic growth. Rising share prices, for instance,

tend to be associated with increased business investment and vice versa.

Indian stock markets are one of the oldest in Asia. Its history dates back to nearly 200 years.

Mainly there are two stock exchanges in India Bombay stock exchange (BSE) and National

stock exchange (NSE).

http://etf.about.com/od/commodityetfs/a/Commodity_ETF.htm

http://etf.about.com/od/typesofetfs/tp/Types_of_Gold_ETFs.htm


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1. Bombay Stock Exchange:

The Bombay Stock Exchange Limited popularly called BSE is the oldest stock exchange in

Asia It is located at Dalal street Mumbai. Bombay stock exchange was established in

1875.There are around 5000 Indian companies listed in the stock exchange.

As of July 2005, the market capitalisation of the BSE was about Rs.20 trillion i.e. US $ 466

billion. The BSE SENSEX is the short form of SENSitive indEX also called the BSE 30. It is

a widely used market index in India and Asia. As of 2005, it is among the 5 biggest stock

exchanges in the world in terms of transactions volume. Along with the NSE the companies

listed on the BSE have a combined market capitalisation of US$ 125.5 billion.In 1990 the

BSE crossed the 1000 mark for the first time. It crossed 2000, 3000 and 4000 figures in 1992.

The up-beat mood of the market was suddenly lost with Harshad Mehta Scam.

BSE Sensex

The BSE SENSEX also known as the BSE 30 is a value-weighted index composed of 30

scrips, with the base April 1979 = 100. The set of companies which make up the index has

been changed only a few times in the last 20 years. These companies account for around one-

fifth of the market capitalization of the BSE. Apart from BSE SENSEX, BSE uses other

stock indices as well.

BSE 500

BSEPSU

BSEMIDCAP

BSESMLCAP

BSEBANKEX

2. National Stock Exchange (NSE):

The National Stock Exchange of India (NSE) is one of the largest and most advanced stock

markets in India. The NSE is the world's third largest stock exchange in terms of transactions.

It is located in Mumbai. The National Stock Exchange of India was promoted by leading

Financial Institutions on behalf of the Government of India. It was incorporated in November

1992 as a tax-paying company. In April 1993 it was recognized as a stock exchange under the

Securities Contracts Regulation Act 1956. NSE commenced operations in the Wholesale

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Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the

NSE commenced operations in November 1994.

NSE has remained in the forefront of modernization of India's capital and financial markets,

and its pioneering efforts include:

Being the first national, electronic limit order book (LOB) exchange to trade

securities in India. Because of the success of NSE the existent market and new market

structures have followed the "NSE" model.

Setting up the first clearing corporation "National Securities Clearing Corporation

Ltd." in India. NSCCL was a landmark in providing novation on all spot equity

market and later derivatives market trades in India.

Co-promoting and setting up of National Securities Depository Limited, first

depository in India.

Setting up of S&P CNX Nifty.

NSE pioneered commencement of Internet Trading in February 2000, which leads to

the wide popularisation of the NSE in the broker community.

Being the first exchange to trade ETFs i.e. exchange traded funds in India.

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-market

operations are streamlined coupled with the countrywide access to the securities.

Delays in communication, late payments and the malpractice’s prevailing in the

traditional trading mechanism can be done away with greater operational efficiency

and informational transparency in the stock market operations, with the support of

total computerized network.

Currently NSE has the following major segments of the capital market:

Equity

Futures and Options

Retail Debt Market

Wholesale Debt Market

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Wholesale debt market operations are similar to money market operations, institutions

and corporate bodies enter into high value transactions in financial instruments such as

government securities, treasury bills, public sector unit bonds, commercial paper,

certificate of deposit etc.

Indices

NSE also set up as index services firm known as India Index Services & Products Limited

(IISL) and has launched several stock indices, including:

S&P CNX Nifty

CNX Nifty Junior

CNX 100

S&P CNX 500

CNX Midcap

3. Other stock exchanges in India

Ahmedabad Stock Exchange

Bangalore Stock Exchange

Bhubaneswar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange

Coimbatore Stock Exchange

Delhi Stock Exchange Association

Gauhati Stock Exchange

Hyderabad Stock Exchange

Inter-connected Stock Exchange of India

Jaipur Stock Exchange

Ludhiana Stock Exchange Association

Madhya Pradesh Stock Exchange

Madras Stock Exchange

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Mangalore Stock Exchange

Mumbai Stock Exchange

OTC Exchange of India

Pune Stock Exchange

Saurashtra-Kutch Stock Exchange

Uttar Pradesh Stock Association

Vadodara Stock Exchange

4. Stock market regulation.

It was well recognized that protection of investors calls for the regulation of issues of

securities and of markets where securities are traded. The securities market is sustained by

the confidence of the investors; the confidence of the investors that their invested capital will

not be subject to dishonest and unfair practices. An important objective of the regulation of

the securities market is thus protection of the investors from dishonesty, fraud and unfair

practices.

Securities markets in India have a hoary past, but in recent years they have gained importance

due to the rapid expansion in the quantum of funds raised and number of investors in the

primary market, the increase in the number of stock exchanges and listed stocks, the speedy

rise in capitalization and volume of trade and the entry of sophisticated investors such as

foreign institutional investors, collective investment schemes like mutual funds and finance

companies.

The principal legislations governing directly or indirectly the security markets Are the

Securities Contract (regulation) Act 1956 and the Securities Exchange Board of India Act

1992.

5. Securities and Exchange Board Of India (SEBI)

SEBI was established under the Securities Exchange Board of India Act in 1998 to regulate

and develop the growth of the Indian capital market. SEBI regulates the working of the stock

exchanges and intermediaries such as stock brokers and merchant bankers, accords approval

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for mutual funds and register foreign institutional investors who wish to trade in Indian

scrip’s.

The guiding principles of the regulation are defined to include:

Equality of treatment and opportunity to all the shareholders.

Transparency in acquisition of shares.

Protection of rights for small and minority shareholders.

Avoidance of use of price sensitive information concerning a public offer by all

persons privy to confidential information for their own profit.

Since its inception SEBI has been working targeting the securities and is attending to the

fulfillment of its objectives with commendable zeal and dexterity. The improvements in the

securities markets like capitalization requirements, margining, establishment of clearing

corporations etc. reduced the risk of credit and also reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed registration norms,

the eligibility criteria, the code of obligations and the code of conduct for different

intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars,

portfolio managers, credit rating agencies, underwriters and others. It has framed bye-laws,

risk identification and risk management systems for Clearing houses of stock exchanges,

surveillance system etc. which has made dealing in securities both safe and transparent to the

end investor.

Another significant event is the approval of trading in stock indices (like S&P CNX Nifty &

Sensex) in 2000. A market Index is a convenient and effective product because of the

following reasons:

It acts as a barometer for market behavior;

It is used to benchmark portfolio performance;

It is used in derivative instruments like index futures and index options;

It can be used for passive fund management as in case of Index Funds.

Many players have entered the market for the distribution of financial products. These range

from small local financial advisors to large distribution companies with presence all across

the country. The companies that are in the financial services industry include IL&FS

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Investsmart, Indiabulls, JM Financial Securities, Geojit Financial Services, JRG securities

Ltd, Fortis Securities etc.

Many of these have companies have come up with IPO’s in the last few years and some of

these companies are entering to new businesses. The turnover of these companies is on an

increasing trend since the capital market is on a buoyant phase. The companies are also going

for the distribution of new products.

Several banks have also begun the business of distribution of these products through their

branches or have established separate divisions to handle this operation. At present Foreign

Institutional Investors (FII) are investing in Indian stock market in a large way. The booming

economy with high GDP growth is attracting FIIs to Indian market. All these are good

indicators for the financial services industry.

COMPANY PROFILE

Capstocks is a professionally managed stock broking company having an unblemished and

unparalleled service history of more than 23 years and a vibrant tradition of trust, loyalty and

reliability. Capstocks was started by Rajendran.V, the present Managing Director of the

company, in the year 1989. Capstocks is having both online and offline trading facilities. It is

the first ISO 9001:2008 certified stock broking firm in India for all services in stock broking

and allied activities.

Capstocks has about 180 outlets in various states of India . Capstocks is a member of the

National Stock Exchange of India (NSE), Bombay Stock Exchange (BSE), MCX Stock

Exchange (MCX-SX), Depository Participant with the Central Depository Services (CDSL)

and a SEBI-registered Portfolio Manager.

Capstocks also offers commodity services through its subsidiaries Capstocks Finanacial

Services Ltd which is a member of the Multi-Commodity Exchange of India (MCX) and

Capstocks Commodities Pvt Ltd which is a member of National Commodity Derivative

Exchange (NCDEX), National Multi-Commodity Exchange of India Ltd (NMCE) and

National Spot Exchange of India Ltd (NSEL).

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Management

The Company's Management rests on:

• Rajendran. V. (Chairman & Managing Director) Engineer by profession, with in-depth

knowledge and experience in market analysis.

• Leela Jeyakumar (Director) Post Graduate with over 18 years experience in stock broking

and the in charge of company's Tamil Nadu operation since 1992.

• Meera Sahib. B (Director) Post Graduate with LLB & CAIIB and 28 years of experience in

officer / executive cadre in a major Public Sector Bank

• Amjad Hydari (Vice President) Post Graduate with more than 14 years experience in

various functions of the equity market brokerage.

•Other Directors

Srinivasan S.IAS. (Director) Former Labor Commissioner and District Collector. Presently,

Chairman and Managing Director, ODEPEC.

Prema Rajendran (Director) Graduate in Commerce with more than 12 years experience.

Rajeev Pillai (Executive Director) Engineer By Profession with wide exposure to

International business organisations and consulting firms. Currently heading the North &

West India Operations of Capstocks with head quarter at Mumbai.

Besides we have an excellent pool of trained & dedicated professional staff, three fourth of

them are certified by NCFM, NISM, BCSM, BCDM Examinations.

Services offered

1. Online trading

Capstocks has a network of branches with online terminals of NSE and BSE in the Capital

market and Derivative segments. Our clients are assured of prompt order execution through

dedicated phones and expert dealers at our offices.

2. Internet trading

Capstocks offers Internet trading through this site. You can trade through the Internet from

the comforts of your office or home, anywhere in the world. Our dedicated IT systems ensure

service up time and speed, making Internet broking through Capstocks hassle-free.

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Using the 'easiest' facility provided by CDSL, our clients can transfer the shares sold by them

online without delivery instruction slips. Additionally, digitally signed contract notes can be

sent to clients through E-mail.

3. Depository Services

Capstocks is a member of the Central Depository Services Limited (CDSL), offer depository

services with minimum Annual Maintenance Charges and transaction charges. Account

holders can view their holding position through the Internet. We also offer the " e asi est "

facility provided by CDSL (electronic access to securities information and execution of

secured transaction ) through which clients can give delivery instructions via the Internet.

4. Derivative Trading

We offer trading in the futures and options segment of the National Stock Exchange(NSE).

Through the present derivative trading an investor can take a short-term view on the market

for upto a three months’ perspective by paying a small margin on the futures segment and a

small premium in the options segment. In the case of options, if the trade goes in the opposite

direction the maximum loss will be limited to the premium paid.

5. Knowledge Centre

Knowledge Centre activities are intended to provide systematic and structured services

mainly to new investors and also to young aspirant aiming for a career in financial markets.

The centre has three functional areas: the publication Division, the Training centre, and

wealth management advisory service which provide complete investment solutions to

investors through knowledge based personalized service.

6. Equity Research Department

We have a full-fledged Investment Research & Analysis Department to help our clients to

make investment decisions. Our clients can get information on any share they hold or plan to

purchase. We publish a monthly newsletter' CAPSTOCKS INFOLINE ' , which contains our

views on the latest trends in the markets, scrip recommendation, tutorials, news items etc. We

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also issue a daily newsletter, ' CAPS TREND ', which is available in our site . Besides we

give intraday calls by SMS, chat, etc. You can avail yourself of this service by calling :+91-

471-2468160, 4013887

7. Portfolio Management services

Capstocks is a SEBI-approved portfolio manager offering discretionary and non-discretionary

schemes to its clients. Capstocks’ portfolio management team keeps track of the markets on a

daily basis and is exposed to a lot of information and analytic tools which an investor would

not normally have access to. Other technicalities pertaining to shares like dividends, rights,

bonus, buy-back, Mergers and Acquisitions are also taken care of by us. Maximize your

returns by opting for our PMS scheme. Please Call +91-471- 4013887,4013882

8. Commodity Trading

You can trade in commodity futures like gold , silver, crude oil , rubber etc. and take

advantage of the extended trading hours (10 am to 11 pm ) in commodities trading. Do,

please Call +91-471- 4013891,9847917187.

9. Mutual Funds, Bonds etc.

We also offer Mutual Funds and Bonds. You can select from a wide range of Mutual Funds

and Bonds available in the markets today. You can get the service by Calling : +91-471-

4013885,4013886,98473 19187.

10. NRI CELL

We have a well-organized NRI Cell functioning exclusively to meet the requirements of our

clients residing outside India. We are committed to provide them timely assistance by placing

their orders, giving them valuable suggestions concerning their investments etc. Also we help

those NRI’s who desire to open accounts on repatriation basis. Facilities are offered to those

clients who are interested in Internet trading by activating it, in co-ordination with the e-

trading department.

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11. Currency Trading

Capstocks is a member of currency derivatives segment of National Stock Exchange (NSE)

and MCX Stock Exchange (MCX-SX). Currency Derivatives are a new asset class which was

earlier not permitted for trading to all Indian residents. Currently the trading is based on four

underlying currencies viz., US Dollar, Euro, Pound sterling, Japanese Yen. Please Call +91-

471-4093343, 09961886876.

12. Pan Service Agent of UTI

Capstocks & Securities (India) Pvt. Ltd. has become authorized PAN card service agent

(PSA) of UTI. Now pan applications can be submitted to any of the following offices, in

addition to Head office.( Sasthamangalam, Sreekaryam, Technopark, and Pattom, in

Trivandrum) Kollam, Alappuzha, Thiruvalla, Ernakulam, Thrissur, Irinjalakkuda,

Thodupuzha, Calicut, Chennai RO, Mangalore, Navi Mumbai, and Nagercoil RO. Capstocks

offers this value added service to our privileged customers, existing as well as new customers

at nominal processing charges.

* Through subsidiary company Capstocks Financial Services Ltd

ISO Certification

Capstocks has become the first ISO 9001:2008 brokerage in India to get certification for all

stock broking and related financial service activities including Cash Markets, Derivatives,

Internet Trading, Depository Services, Portfolio Management Services, Equity Research and

Analysis, NRI Client Cell and Mutual Funds. The certification was obtained from the

renowned United Kingdom Accreditation Services (UKAS), based on the Assessment by

Moody International Certification Group through ICL Certifications Ltd.

The certificate was handed over at a function held in Trivandrum. Mr. Ashok Kumar Rout,

Chief Operating Officer of the Bombay Stock Exchange Ltd., was the Guest of Honour on

the occasion. Mr. Rajendran V, our Managing Director, received the certificate from Mr.

Uwe Saelzle, Director of Moody International Certification Group, Germany, in the presence

17

of Mr. Sanjeev Chadha, CEO, ICL Certifications Ltd., handling the Indian operations of the

Moody International Certification Group.

Mr. Dilip Jacob Mathew, our Vice President, handled ISO 9001:2008 implementation as the

Management Representative with assistance from Ms. Sangeetha, Sr. Executuve (QMS), and

Mr. M. Pradeep Kumar, Management Systems Consultant and Trainer. A dedicated team of

Managers and Executives, trained as Internal Quality Auditors in Capstocks, was involved in

the Internal Assessments and improvement processes.

Commenting on the certification, Rajendran V, our Managing Director said “We spent nearly

15 months to complete the ISO 9001:2008 certification process. There is a sea change in the

organizational efficiency and day-to-day operations in our Company. The process flow and

our organizational structure from top to bottom have been totally streamlined and the benefits

will definitely be reflected in offering better services with the utmost satisfaction to our

clients. As a result of ISO 9001:2008 implementation programme, Capstocks - having 75

branches covering India and else where - has been able to improve continually its systems,

processes and procedures at the Head Office and its Branches with better review mechanisms.

With the ISO 9001:2008 recognition under our belt, Quality of Documentation and

Communication has improved. Capstocks will maintain the Quality Management System and

also continually improve the quality of service through regular Management Reviews and

Internal Quality Audits. As part of this project, emphasis is being given to imparting effective

training and retraining for Capstocks Team Members and systematic analysis of activities.

Capstocks Knowledge Centre Inaguration

Capstocks has envisioned a series of programmes to spread awareness of the financial sector

among its investors and the public, through the ‘Capstocks Knowledge Centre’ which was

inaugurated by Shri. R.K. Nair, Executive Director, SEBI. Capstocks has been organizing

awareness sessions on the financial sector – especially related to the stock market – for

investors, students and everyone with an interest in the market. With the launch of knowledge

Centre, we intend to provide systematic and structured service mainly to new investors and

also to young aspirants aiming for a career in financial markets. This Centre which is

presumed to be the first of its kind in India providing a comprehensive knowledge – based

service to investors for all their investment needs shall have its headquarter at Trivandrum.

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The booming Indian economy and the varied options in the investment scenario have

definitely attracted people’s attention but most people do not have a basic understanding of

the sector and hence, they are unable to take advantage of many investment and job

opportunities. The Capstocks Knowledge Centre has three functional areas: the publication

division, the training centre and the wealth management service.

1.2 RESEARCH METHODOLOGY

Financial research can be a systematic and organized effort to investigate into a

problem encountered in the investment scenario. It comprises a series of theoretical

concepts designed and executed, with the goal of finding answers to the issues that are

of concern to the manager and the work environment. The first step in the process is to

identify the problem areas that exist in the selection of securities. Once the problem is

clearly identified the next step is to gather information analyze the data, and determine

the factors that are associated with the problem and solve it by taking necessary

corrective actions. The entire process by which we attempt to solve the problem is

called research. Thus research involves a series of well thought out and carefully

executed actions that will enable the manager to know how organizational problems

can be solved. Research thus encompasses the process of enquiry, investigation,

examination and experimentation. These processes are to be carried out critically,

objectively, and logically.

1.21 OBJECTIVES Primary objective

To find out the performance of various gold fund.

Secondary Objective

To evaluate growth and decline of gold fund.

To analyze risk associated with gold fund.

To find out most promising gold fund.

To study on interrelationship between stock return and market return of gold fund.

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1.2.2 METHODOLOGY OF THE STUDY

The project is designed as analytical in nature to know and familiarize with gold fund

and other shares to Indian investors and its related implications in the share market.

Research methods and techniques that are found suitable are used for conducting this

research. It helped in arriving at solutions by analyzing and relating available data

with unknown aspects of the problem.

1.2.3 RESEARCH DESIGN

Research design stands for the framework of research. The research design utilized in this

study is analytical. For that various statistical tools as well as Microsoft excel tools are being

used here.

1.2.4 STATISTICAL ANALYSIS TOOLS USED

TREND RATIO

Trend signifies tendency. Therefore, review and appraisal of tendency in accounting

variables is simply called trend analysis. It can be calculated with the formula

Current period x 100

Base period

CORRELATION COEFFICIENT

Co- efficient of correlation is an algebraic method of measuring the correlation. Under

this method, we measure correlation by finding a value known as co-efficient of

correlation using an appropriate formula

Formula = n ∑xy - ∑x x∑ y

r = ____________________________

√n∑x2- (∑x2) √n∑y2 – (∑y2)

20

STANDARD DEVIATION

Standard deviation (represented by the symbol σ) shows how much variation or

"dispersion" exists from the average (mean, or expected value). It can be calculate with

the formula

x2

x 2

= n n

BETA

Beta is a statistical tool which measures the systematic risk associated with a security.

This can be done with the formula

β = nxy - (x . y)

nx2 – (x)

2

SHARP INDEX

The Sharp Ratio or Sharp Index is a measure of the excess return per unit of risk in an

investment asset or a trading strategy. The Sharp Ratio is used to characterize how well

the return of an asset compensates the investor for the risk taken. When comparing two

asset each with the expected return Rf, the asset with the higher sharp ratio give more

return for the same risk. Investors are often advised to pick investments with higher Sharp

ratios.

Sharp index = Rp – Rf × 100

http://en.wikipedia.org/wiki/Sigma

http://en.wikipedia.org/wiki/Statistical_dispersion

http://en.wikipedia.org/wiki/Mean

21

TREYNOR INDEX

The TREYNOR Ratio is a measurement of the returns in excess of that which could have

been earned on a riskless investment. It is also known as reward to volatility ratio. The

ratio related excess return over the risk free rate to the additional risk taken. However,

systematic risk invested of total risk is used. The higher the ratio the better the

performance under analysis.

Treynor index = Rp – Rf × 100

β

MARKET VALUE

Market value / Market price is economic price for which a good or service is offered

in the market place. It is of interest, mainly in study micro economics. Market value

and Market price are equal only under conditions of market efficiency, equilibrium

and national expectations.

1.2.5 PERIOD OF THE STUDY

The study is conducted for a period of 30 days commencing from 11th

February 2013

to 15th

April 2013. Data collected is for a period of 1st January to 30

th March.

1.2.6 DATA SOURCES

For carrying out the study, both primary and secondary data are required. The methods of

data collection are as follows:

Primary Data

Primary data are those data which are collected for the first time and this is happen to be

original in character .Here primary data was collected through direct personal interview with

research heads and other officials of Capstocks.

22

Secondary Data

Secondary data involves the existing information available for the study. It comprises of :

Details were obtained from company files ,records and documents

Various published books, journals and news papers

Web pages of NSE, BSE

1.3 SIGNIFICANCE OF STUDY

The study intended for a period of one month from March 11 to April 15, 2013. This study

will help to understand the performance of gold fund. Number of first-time investors look at

gold as the only way to preserve their wealth in a period before inflation sets in. It's

important for investors to familiarize themselves with the differences between products

to ensure they are making appropriate investment decisions. Gold fund is a mutual fund

or exchange-traded fund (ETF) that invests primarily in gold-producing companies or

gold bullion.

1.4 LIMITATION OF THE STUDY

Research is done on the historical data collected from NSE

Due to time constraints other strategies. could not be studied

Brokerage cost are not taken into consideration

Taxes are not taken into consideration.

1.5 CHAPTERIZATION

The report is made up of following chapters

Chapter 1: Introduction

Chapter 2: Literature review

Chapter 3: Data collection and analysis

Chapter 4: Findings & Recommendations

Chapter 5: Conclusion

23

CHAPTER 2

LITERATURE REVIEW

2.1 ETFs’ Performance Across Countries

The existing evidence in the literature on performance of ETFs is mixed. While there were

many papers reporting negative performance of ETFs, there were others that presented strong

positive evidence about the performance of ETFs.

Adjei Frederick (2009) found no significant difference between the performances of the ETFs

and the S&P 500 index. He found weak evidence of performance persistence on both the

half-yearly and the yearly horizons. Johnson (2009) reported the existence of tracking errors

between foreign ETFs and the underlying home index returns. Blitz David et al. (2010)

investigated the performance of index mutual funds and the ETFs that are listed in Europe.

They found that European index funds and ETFs underperform their benchmarks by 50 to

150 basis points per annum. William (2009) found the existence of tracking errors between

foreign ETFs and theunderlying home index in US.

Blitz David and Huij (2011) evaluated the performance of ETFs that provide passive

exposure to global emerging markets (GEM) equities and found that GEM ETFs exhibit

higher tracking error. Houweling (2011) found that treasury ETFs were able to track their

benchmark but investment grade corporate bond ETFs and high yield corporate bond ETFs

underperform their benchmarks. Charupat & Miu (2011) analyzed the performance of

leverage ETFs, and concluded that price deviations are small among leverage ETFs and that

price volatility is more, as a result of rebalancing, at the end of the day.

Patrick (2011) found that in Hong Kong the magnitude of tracking errors is negatively related

to the size but positively related to the expense ratio of the ETFs. He further commented that

replicating the performance of underlying securities involves more risk, since they have a

higher tracking error than in the US and Australia.

24

Chang and Krueger (2012) investigated the performance of Exchange-Traded Funds and

Closed-End Funds over the 2002 to 2011 period. They studied investment results such as

returns, risks and risk-adjusted returns and found that though ETFs have significantly lower

expenses, their performance is statistically worse than those of close-ended funds.

On the contrary, there was equal evidence of positive performance of ETFs. Ching-Chung

et.al. (2005) indicated that the Taiwanese ETF and, the Taiwan Top 50 Tracker Fund (TTT)

are price efficient and trading on them produces almost identical returns to the Taiwan stock

market. Joel et al. (2006) compared the risk and return performances of ETFs available for

foreign markets and closed-end country funds. They found higher mean returns and Sharpe

ratios for ETFs, and concluded that a passive investment strategy through ETFs is observed

to be superior to an active investment strategy using closely held country funds.

Huang and Guedj (2009) investigated as to whether an Exchange-Traded Fund (ETF) is a

more efficient indexing vehicle than an Open-Ended Mutual Fund (OEF). They noted that

ETFs are better suited for narrower and less liquid underlying indexes, and also for investors

with long investment horizons. Jack et al. (2009) indicated that the US ETFs are more likely

to trade at a premium than at a discount, with comparatively large daily price fluctuations.

Gerasimos (2011) found that ETFs trade at a premium from their Net Asset Value (NAV) and

the pattern of their returns can be predicted.

Meric et al. (2009) reported that from October 9, 2007 to March 9, 2009, the U.S. stock

market experienced the worst bear market and lost about 56% of its value during this period.

They compared the performances of 38 sector index funds using the Sharpe and Treynor

portfolio performance measures and found that the healthcare and consumer staples sector

index funds had the best performance and the financials and home construction sector index

funds had the worst performance in the October 9, 2007-March 9, 2009 bear market run.

Wong and Shum (2010) examined the performances of 15 worldwide ETFs across bearish

and bullish markets over the period 1999 to 2007. They observed that ETFs always provide

higher returns in a bullish market than in a bearish market. They noted from the Sharpe ratios

that ETF returns are not positive and proportional to the market volatility.

25

Yuexiang et al. (2010) investigated the pricing efficiency of the Shanghai 50 ETF (SSE 50

ETF), the first Exchange-Traded Fund (ETF) in China. They demonstrated that ETF market

prices and their Net Asset Values are co-integrated and there is a unidirectional causality

from price to NAV. They also found that the fund’s prices did not closely follow the NAV

during the second half of 2007, when the Chinese stock market experienced substantial

volatility, reflecting sudden increased market risks as well as potential arbitrage opportunities

during financial turbulences. Gerasimos (2011) found that the performance of ETFs is

predictable and the return superiority is persistent in the short term level. This mixed

evidence about performance of ETFs across developed as well as emerging economies

warrants and motivated the present research about the performance of ETFs in India.

2.2 Mutual Fund Performance in India

There are many research papers on the Indian mutual fund (MF) industry. Sivakumar et al.

(2010) observed that private players were able to mobilize greater resources in the Indian MF

industry than public institutions. Jaspal Singh (2004) evaluated the performance of various

mutual funds and found that ICICI prudential floated and managed by a private AMC is the

best performer in India. Madhumita et al. (2008) evaluated the performance of mutual funds

on the basis of rate of returns as well as risk-adjusted methods, and found that the majority of

equity funds outperformed the benchmark index. Most of these studies evaluated the growth

and performance of equity funds, but there is no paper on Exchange-Traded Funds in India.

A company that collected money from a group of people with common investment objectives

to buy different securities is called mutual fund. The collected holding of these securities was

known as its portfolio Mark (2007). According to Teri (2007) mutual fund is a professional

investment company which managed collection of stocks, bonds, or other securities owned by

a group of investor. Each mutual fund had a fund manager who purchased and sold the fund’s

investment according to the fund goals. Fund managers were responsible to analyze the

economic conditions, industry trends, government regulations and the impact on stocks

before selecting the securities for investment.

Mutual funds provided investment facility to the small investors who cannot afford to invest

the large sums of money Teri (2007). Basically these small investors invested money into a

common fund and handover the investment decision to fund manager. Many people often

26

regard the beginning of Foreign and Colonial Government Trust as the beginning of modern

day mutual funds. But the beginning of mutual funds dates back to Seventeenth century when

the first "pooling of money" for investments was done in 1774. Following the financial crisis

of 1772-1773 a Dutch merchant Ketwich invited investors to come together to form an

investment trust under the name of Eendragt Maakt Magt David (2007). The purpose of the

trust was to provide diversification at low cost to the small investors.

In order to spread risk, the fund invested in various countries such as Austria, Denmark,

German States, Spain, Sweden, Russia etc. In 18th century Amsterdam Stock Exchange had

only a small number of listed equities due to which the trust invested only in bonds. However

after war with England many colonial bonds defaulted due to which there was sharp decline

in the investments. As a result, share redemption was suspended in 1782 and later the interest

payments were decreased too. The fund was no longer attractive for investors and vanished.

These early mutual funds before heading to the United States took root in England and

France in the 1890s. On the other hand “Massachusetts Investors' Trust of Boston” was the

first open-end fund Formed in 1924. The growth of pooled investments was hampered by

stock market crash of 1929 and the Great Depression but Securities Act of 1933 and

Company Act of 1940 restored investor’s confidence and industry witnessed steady growth

after that.

Several measures are used in the literature on mutual fund performance evaluation but there

is (still) a large controversy around them. Some of the important risk-adjusted techniques

include the Sharpe (1966) measure, the Treynor (1965) measure and the Jensen (1968)

measure. These measures were frequently called traditional measures of performance

evaluation and were based on the idea that the combination of any portfolio with the risk-free

asset is located in the expected return or beta space. The Jensen measure has been the most

commonly used performance measure in academic and non-academic empirical studies. On

the other hand Sharpe’s reward-to-variability ratio was also very popular and was frequently

used by the researchers. Some of the empirical work on the performance of mutual funds was

given below.

Sharpe (1966) introduced the measure to evaluate the mutual funds’ risk-adjusted

performance. The measure was known as reward-to-variability ratio (Currently Sharpe

Ratio). With the help of this ratio he evaluated the return of 34 open-end mutual funds in the

27

period 1945-1963. The results showed the capital market was extremely efficient due to

which majority of the sample had lower performance as compared to the Dow Jones Index.

Sharpe (1966) found that from 1954 to 1963 only 11 funds outperformed the Dow-Jones

Industrial Average (DJIA) while 23 funds were outperformed by the DJIA. Study concluded

that the mutual funds were inferior investments during the period.

Previously two- and three-moment analyses were used to analyze the mutual fund

performance relative to market performance. But Joy and Porter (1974) applied first-, second-

, and third-degree stochastic dominance principles to investigate the same question. Study

suggested that the proper test of mutual fund performance relative to the market (DJIA) is a

test employing stochastic dominance principles. Such a test necessitates a pair wise

comparison between each fund and the DJIA. Therefore Joy and Porter (1974) collected the

performance data for the 34 funds analyzed by both Sharpe (1966) and Arditti (1971) for the

ten-year period 1954-1963. Price and dividend data were also collected for the DJIA over the

same period. Study supported the earlier Sharpe (1966) study and opposed the Arditti (1971)

work and concluded that mutual fund performance was inferior to market performance over

the period 1954-1963.

In today’s financial markets exchange traded funds (ETFs) are considered a highly valuable

mean of investment. The ETFs has emerged as most successful innovation and ETFs industry

shown rapid growth in last decade, with a 5-year average annual growth rate of 33 percent

(Schuster, 2008). Fuhr (2001) described that almost two or three ETFs are on the list of the

top five most actively traded stocks in the AMEX. ETFs are an extremely successful form of

basket securities, which enable investors to trade a portfolio easily and quickly in a single

transaction. Further, exchange traded funds permit investors to obtain the benefits of portfolio

diversification and track the performances of underlying indexes without incurring high

transaction costs (Lin et al, 2006).

S.Narayan Rao , et. al., evaluated performance of Indian mutual funds in a bear market

throughrelative performance index, risk-return analysis, Treynor’s ratio, Sharpe’s ratio,

Sharpe’smeasure , Jensen’s measure, and Fama’s measure. The study used 269 open-ended

schemes (outof total schemes of 433) for computing relative performance index. Then after

excluding fundswhose returns are less than risk-free returns, 58 schemes are finally used for

further analysis. Theresults of performance measures suggest that most of mutual fund

28

schemes in the sample of 58were able to satisfy investor’s expectations by giving excess

returns over expected returns basedon both premium for systematic risk and total risk. Bijan

Roy, et. al., conducted an empiricalstudy on conditional performance of Indian mutual funds.

This paper uses a technique calledconditional performance evaluation on a sample of eighty-

nine Indian mutual fund schemes .This paper measures the performance of various mutual

funds with both unconditional and conditionalform of CAPM, Treynor- Mazuy model and

Henriksson-Merton model. The effect of incorporating lagged information variables into the

evaluation of mutual fund managers’ performance is examined in the Indian context. The

results suggest that the use of conditioninglagged information variables improves the

performance of mutual fund schemes, causing alphasto shift towards right and reducing the

number of negative timing coefficients. Mishra, et al.,(2002) measured mutual fund

performance using lower partial moment. In this paper, measuresof evaluating portfolio

performance based on lower partial moment are developed. Risk from thelower partial

moment is measured by taking into account only those states in which return is below a pre-

specified “target rate” like risk-free rate. Kshama Fernandes(2003) evaluated indexfund

implementation in India. In this paper, tracking error of index funds in India is measured.The

consistency and level of tracking errors obtained by some well-run index fund suggests thatit

is possible to attain low levels of tracking error under Indian conditions. At the same

time,there do seem to be periods where certain index funds appear to depart from the

discipline of indexation. K. Pendaraki et al. studied construction of mutual fund portfolios,

developed a multi-criteria methodology and applied it to the Greek market of equity mutual

funds. Themethodology is based on the combination of discrete and continuous multi-criteria

decision aidmethods for mutual fund selection and composition. UTADIS multi-criteria

decision aid methodis employed in order to develop mutual fund’s performance models. Goal

programming model isemployed to determine proportion of selected mutual funds in the final

portfolios.

Exchange Traded funds (ETFs) are open ended index funds that are listed and traded on

exchanges like stockequity based on the price of metal. Ferri (2007) defined ETFs as “ETFs

are baskets of securities that are traded, like individual stocks, through a brokerage firm on a

stock exchange.” The first bonafide ETF was launched in US in 1993, a tradable depositary

receipt for a portfolio of index stocks held in a unit investment trust. It was called the S&P

Depositary Receipt, and it also tracked the S&P 500 Stock Index (Lofton, 2007). However in

China the first ETF was launched in 2004. Since then ETFs have become a key innovation in

29

the Chinese exchange based markets (Hsu et al, 2009). Presently, there are five ETF listings,

and assets under management for the five ETFs are USD 5.2 billion (Hsu et al, 2009). ETF

are mainly in Gold, Silver, Platinum and Palladium. However, the focus of this study was

Gold ETFs.

Gold ETFs have gained greater significance as successful mean of investment in the last

decade. The recent global financial crisis increased the demand for gold hedge. The value of

gold holdings with trading exchanges has continued to increase since last decade. The major

data of the world seven largest gold ETFs indicates that, the total holdings of the world's

seven largest golden ETFs are 1383.8 tons. At the same time in order to hedge the stock

market turmoil, the housing market problems are constantly emerging, and other credit

crunch in the area, due to which the demand for gold gradually increased. The gold ETF

(exchange-traded index funds) provides a convenient way to the investors to intervene in the

gold market.

2.3 Gold ETF Overview

Gold ETFs are defined in several ways. According to Bang (2009) gold ETF is basically an

open-ended mutual fund that invests in standard gold bullion as its underlying asset. It is also

known as paper gold. These instruments are listed on the stock exchanges and, hence, can be

bought and sold just like buying and selling of shares.The first gold exchange-traded fund

was launched in March 2003 on the Australian Stock Exchange (Bloomenthal, 2008). In U.S.

the Gold ETF trading began on the New York Stock Exchange (NYSE) in 2004. These ETFs

are traded under the symbol “GLD”. Different people define and perceive GLDs differently.

Some people perceive that they will own physical gold by investing in the shares of Gold

ETFs. However, it’s not the right perception. The objective of GLDs is not to provide

investors with the opportunity to own gold bullion by investing in the shares of gold ETF.

Rather, gold ETFs are designed to track the price of gold. Gold ETF Index Fund is a kind of

gold-based assets. It tracks the gold price and each share represents one-tenth of an ounce of

gold. With transaction convenience, storage security, transaction costs and low liquidity,

transparency of transactions and many other investment advantages, gold ETF has become

widely accepted.

30

Jill Leyland Economic Advisers to World Gold Council said that the unlimited potential of

gold ETF is of high interest for those countries who have not yet introduced such products.

He further pointed out that, in addition to insurance funds, other agencies such as public

funds, sovereign wealth funds, investment to gold ETF's also raise the demand for gold.

Nedeljkovic (2005) described that Gold ETFs, compared to some other structured products,

are very simple structures. He further, described that there is no credit risk and investment in

Gold ETFs is accessible and simple. Gold ETFs are listed on a stock exchange, quoted in

local currency, with no minimum investment. The other considerable characteristics of Gold

ETFs are their cost effectiveness, security, and high liquidity (Nedeljkovic, 2005).

Several studies have been conducted about ETFs, their trading characteristics and benefits

(Gallagher and Segara, 2005; Jares and Lavin, 2004 and Kostovetsky, 2003). Milonas and

Rompotis (2006) conducted a study on the performance and the trading characteristics of the

ETFs. Gastineau (2001) described the origin, main types and the benefits of ETFs. Carty

(2001) confers several characteristics of ETFs like flexibility, convenience, risk

diversification, tax efficiency and cost advantages.

2.4 The Status of the Global Gold ETF

Currently, ETF demand for gold has become the fastest growing area; its growth rate is

higher than jewellery and industrial consumption. The demand for gold ETFs and similar

products is rapidly increasing over the time. According to statistics, the first gold ETF since

its inception in March 2003, approximately attracted 180 billion U.S. dollars investment,

which is equivalent to 650 metric tons of gold, accounting for 10 percent of the world's total

demand. During this period, the price of gold also rose to almost double. Before the

introduction of the gold ETF there was no direct involvement in commodity markets to hedge

the risk of the stock and bond markets. At that time the main investment was through the

purchase of gold stocks and funds to hedge risk, but such ways that lacks transparency,

liquidity, and also bear gold mine operations and the risk of mismanagement. Ross Norman

(2010) an internationally known gold analyst at The Bullion Desk, said gold ETF market has

greatly improved its availability in a short time. The first gold ETF listed on the Australian

Stock Exchange (ASX) launched under the symbol “GOLD”, has made a very good

introduction to the sales, just in June raised on 340 million ounces of gold, this also attracted

the international community to the gold ETF. As the New York Stock Exchange's successful

31

listing Street TRACKS Gold Shares, gold ETF open a prelude to a rapid development. Since

then, the United Kingdom, South Africa, Switzerland, India and other countries also have

launched similar products; table 2 indicates the major gold ETFs traded in the world. Gold

ETF trading gold on the widened channels, one hand improved the international market gold

demand, and on the other also expands the market capacity.

China is the world's largest gold producer and second largest consumer. Gold production in

China is mainly concentrated in Shandong, Henan, Fujian, Liaoning, Hunan, Shaanxi and

other places. At present the prices in China's gold market, are gradually align with the

international gold market. In 2007 China's output of 276 tonnes of gold, made it the world’s

largest for the first time following South Africa which produced 272 tonnes (Mathews, 2008).

With the continuous improvement of people's living standard, China's gold consumption

maintains sustained growth, in 2008-09. China is the world’s second-largest consumer of

gold after India with last year’s consumption of 427.5 tonnes (Subramani, 2010). China’s

gold reserves also show an increasing trend and reach to 1054 tonnes in 2009. However the

gold share of national foreign exchange is still very small at 1.5 percent and US dollar and

securities reserves are quite high.

32

References

Adjei, F., (2009). Diversification, Performance, and Performance Persistence in Exchange-

Traded Funds, International Review of Applied Financial Issues and Economics, 1(1).

Anderson, R. I., Brockman C. M., Giannakos, C., & McLeod, R. W., (2004). A Non-

Parametric Examination of Real Estate Mutual Fund Efficiency. International Journal of

Business and Economics, 3(3), 225-38.

Ching-Chung, L., Shih-Ju, C., & Hsinan, H., (2005). Pricing efficiency of exchange traded

funds in Taiwan. Journal of Asset Management, 7(1), 60–68.

Gerasimos, G., & Rompotis., (2011) Does premium impact Exchange-Traded Funds’ returns?

Journal of Asset Management, 11, 298–308.

Gerasimos, G., & Rompotis.,(2011). Predictable patterns in ETFs’ return and tracking error.

Studies in Economics and Finance, 28(1).

Ioannis, E., & Tsolas. (2011). Natural Resources Exchange Traded Funds: Performance

Appraisal using DEA Modeling. Journal of Centrum Cathedra, 4(2), 250-259.

Jaspal, S. (2004). Growth, Performance and Prospects of Mutual Funds in India. Finance

India, 18(4), 1755-1760.

Joel, T., Harper, A., Jeff, M., & Oliver, S. (2006). Performance comparison between

exchange-traded funds and closed-end country funds. International Financial Markets,

Institution and Money, 16(2), 104–122.

Madhumita Chakraborty, P., Jain, K., & Vinay, K. (2008). Mutual funds performance: An

evaluation of select growth funds in India. South Asian Journal of Management, 80(4), 80-92.

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Sivakumar, K. P., Rajmohan, S., Sezhiyan, D. M., & Narasimhulu, S. (2010). Performance

Evaluation of Mutual Fund Industry in India. Vidwat:The Indian Journal of Management,

3(1), 26-32.

Gallagher, R. D. and Reuben S. (2005). The Performance and Trading Characteristics of

Exchange-Traded Funds. Working paper, The University of New South Wales.

Gastineau, G. (2001). Exchange-Traded Funds: An Introduction. Journal of Portfolio

Management, 27, 88-96.

Hsu, J., Li, F., Ma, Z., Song, H., and Y. Pang. (2009). The development of the ETF market in

China.Institutional Investor Journals, 150-154.

Jares, E. Timothy and Angeline M. Lavin. (2004). Japan and Hong Kong Exchange- Traded

Funds (ETFs): Discounts, Returns, and Trading Strategies. Journal of Financial Service

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Kostovetsky, L. (2003). Index Mutual Funds and Exchange-Traded Funds. Journal of

Portfolio Management, 29, 80-92.

Lin, C.C., Chan, S.J., and H. Hsu. (2006). Pricing efficiency of exchange traded funds in

Taiwan. Journal of Asset Management, 7(1), 60–68.

Lofton Todd. (2007). Enter the Exchange-Traded Fund. Exchange Traded Funds, John Wiley

and Sons Inc. 5-6.

Nedeljkovic, V. (2005). The Impact of ETFs on the Gold Market. The LBMA Precious Metals

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Schuster A. J. (2008). ETFs: The Next 10 Years. Global Exchanges & ETFs Report, 34-35.

.

34

CHAPTER 3

DATA COLLECTION AND ANALYSIS Table 3.1

BIRLA SUN LIFE GOLD ETF

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN

DATE OPEN CLOSE OPEN CLOSE Y X X*Y X

2

1-Jan-13 3045 3022 30860 30896 -0.75534 0.116656 -0.08811 0.013609

7-Jan-13 3022 3010.05 30896 30890 -0.39543 -0.01942 0.007679 0.000377

11-Jan-13 3010.05 3015 30890 30738 0.164449 -0.49207 -0.08092 0.242132

17-Jan-13 3015 3030 30738 30713 0.497512 -0.08133 -0.04046 0.006615

23-Jan-13 3030 2970 30713 30710 -1.9802 -0.00977 0.019342 9.54E-05

29-Jan-13 2970 2975 30710 30240 0.16835 -1.53045 -0.25765 2.342265

4-Feb-13 2975 3025 30240 30310 1.680672 0.231481 0.389045 0.053584

8-Feb-13 3025 2945.15 30310 30755 -2.63967 1.468162 -3.87546 2.155501

14-Feb-13 2945.15 2925.9 30755 30050 -0.65362 -2.29231 1.498293 5.254686

20-Feb-13 2925.9 2852.55 30050 29597 -2.50692 -1.50749 3.779152 2.272519

26-Feb-2013 2852.55 2856.1 29597 30055 0.12445 1.547454 0.192581 2.394614

4-Mar-13 2856.1 2909 30055 29632 1.852176 -1.40742 -2.60679 1.98083

8-Feb-13 2909 2867.25 29632 29269 -1.4352 -1.22503 1.75816 1.500691

14-Mar-2013 2867.25 2893.3 29269 29379 0.908536 0.375824 0.34145 0.141244

20-Mar-2013 2893.3 2870.1 29379 29716 -0.80185 1.147078 -0.91979 1.315788

28-Mar-2013 2870.1 2875.5 29716 29477 0.188147 -0.80428 -0.15132 0.646867

BETA

-

0.08389

SUM -5.58394 -4.4829 -0.17628 20.32142

SD 1.329568 VAR 1.76775

Rp -0.349 Rm -0.28018

35

Chart 3.1

Interpretation

It can be seen from the above that the standard deviation (i.e. total risk associated with stock)

is 1.329568, where as the beta value is -0.08389. Here it means that all risk associated with

this stock can be eliminated with proper diversification of the portfolio. Here the beta is less

than one and it shows that the less volatility of the price of the stock in comparison with the

market returns. The average stock return is -0.349 and the average market return are -

0.28018. Here it can be ascertained that there exist a comparatively high difference between

systematic risk and unsystematic risk.

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

Y

X

36

Table 3.2

CANARA ROBECO -GOLD ETF

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN


2

1-Jan-13 3062 3050 30860 30896 -0.3919 0.116656 -0.04572 0.013609

7-Jan-13 3050 3060 30896 30890 0.327869 -0.01942 -0.00637 0.000377

11-Jan-13 3060 3040 30890 30738 -0.65359 -0.49207 0.321613 0.242132

17-Jan-13 3040 3000 30738 30713 -1.31579 -0.08133 0.107017 0.006615

23-Jan-13 3000 3044 30713 30710 1.466667 -0.00977 -0.01433 9.54E-05

29-Jan-13 3044 3045 30710 30240 0.032852 -1.53045 -0.05028 2.342265

4-Feb-13 3045 3004 30240 30310 -1.34647 0.231481 -0.31168 0.053584

8-Feb-13 3004 2900 30310 30755 -3.46205 1.468162 -5.08285 2.155501

14-Feb-13 2900 2950 30755 30050 1.724138 -2.29231 -3.95226 5.254686

20-Feb-13 2950 3025 30050 29597 2.542373 -1.50749 -3.8326 2.272519

26-Feb-2013 3025 3100 29597 30055 2.479339 1.547454 3.836663 2.394614

4-Mar-13 3100 2980 30055 29632 -3.87097 -1.40742 5.448076 1.98083

8-Feb-13 2980 2958 29632 29269 -0.73826 -1.22503 0.904382 1.500691

14-Mar-2013 2958 2955 29269 29379 -0.10142 0.375824 -0.03812 0.141244

20-Mar-2013 2955 2967 29379 29716 0.406091 1.147078 0.465818 1.315788

28-Mar-2013 2967 2967 29716 29477 0 -0.80428 0 0.646867

SUM -2.90112 -4.4829 -0.17628 20.32142

BETA

-

0.16068

SD 1.809835 VAR 3.275503

Rp -0.18132 Rm -0.28018

37

Chart 3.2

Interpretation






0.28018.

-5

-4

-3

-2

-1

0

1

2

3

stock return

market return

38

Table 3.3

GOLDMAN SACHS

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN


2

1-Jan-13 2911.15 2907 30860 30896 -0.14256 0.116656 -0.01663 0.013609

7-Jan-13 2907 2894 30896 30890 -0.4472 -0.01942 0.008685 0.000377

11-Jan-13 2894 2910 30890 30738 0.552868 -0.49207 -0.27205 0.242132

17-Jan-13 2910 2930 30738 30713 0.687285 -0.08133 -0.0559 0.006615

23-Jan-13 2930 2895.1 30713 30710 -1.19113 -0.00977 0.011635 9.54E-05

29-Jan-13 2895.1 2885 30710 30240 -0.34887 -1.53045 0.53392 2.342265

4-Feb-13 2885 2885 30240 30310 0 0.231481 0 0.053584

8-Feb-13 2885 2870 30310 30755 -0.51993 1.468162 -0.76334 2.155501

14-Feb-13 2870 2827 30755 30050 -1.49826 -2.29231 3.434472 5.254686

20-Feb-13 2827 2785.05 30050 29597 -1.48391 -1.50749 2.236969 2.272519

26-Feb-2013 2785.05 2791.5 29597 30055 0.231594 1.547454 0.358381 2.394614

4-Mar-13 2791.5 2789.4 30055 29632 -0.07523 -1.40742 0.105878 1.98083

8-Feb-13 2789.4 2785 29632 29269 -0.15774 -1.22503 0.193236 1.500691

14-Mar-2013 2785 2824 29269 29379 1.400359 0.375824 0.526289 0.141244

20-Mar-2013 2824 2809.8 29379 29716 -0.50283 1.147078 -0.57679 1.315788

28-Mar-2013 2809.8 2806.9 29716 29477 -0.10321 -0.80428 0.08301 0.646867

SUM -3.59874 -4.4829 -0.17628 20.32142

BETA 0.251737

SD 0.763987 VAR 0.583676

Rp -0.22492 Rm -0.28018

39

Chart 3.3

Interpretation






0.28018.

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

40

Table 3.4

HDFC GOLD ETF

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN


2

1-Jan-13 3021.8 3050 30860 30896 0.933219 0.116656 0.108865 0.013609

7-Jan-13 3050 3007 30896 30890 -1.40984 -0.01942 0.027379 0.000377

11-Jan-13 3007 3000 30890 30738 -0.23279 -0.49207 0.114549 0.242132

17-Jan-13 3000 2930 30738 30713 -2.33333 -0.08133 0.189776 0.006615

23-Jan-13 2930 2895.1 30713 30710 -1.19113 -0.00977 0.011635 9.54E-05

29-Jan-13 2895.1 2885 30710 30240 -0.34887 -1.53045 0.53392 2.342265

4-Feb-13 2885 2885 30240 30310 0 0.231481 0 0.053584

8-Feb-13 2885 2870 30310 30755 -0.51993 1.468162 -0.76334 2.155501

14-Feb-13 2870 2827 30755 30050 -1.49826 -2.29231 3.434472 5.254686

20-Feb-13 2827 2785.05 30050 29597 -1.48391 -1.50749 2.236969 2.272519

26-Feb-2013 2785.05 2791.5 29597 30055 0.231594 1.547454 0.358381 2.394614

4-Mar-13 2791.5 2789.4 30055 29632 -0.07523 -1.40742 0.105878 1.98083

8-Feb-13 2789.4 2785 29632 29269 -0.15774 -1.22503 0.193236 1.500691

14-Mar-2013 2785 2824 29269 29379 1.400359 0.375824 0.526289 0.141244

20-Mar-2013 2824 2809.8 29379 29716 -0.50283 1.147078 -0.57679 1.315788

28-Mar-2013 2809.8 2806.9 29716 29477 -0.10321 -0.80428 0.08301 0.646867

SUM -7.29188 -4.4829 -0.17628 20.32142

BETA 0.238189

SD 0.952197 VAR 0.906679

Rp -0.45574 Rm -0.28018

41

Chart 3. 4

Interpretation


is 0.952197, where as the beta value is 0.238189. Here it means that all risk associated with




0.28018.

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

1-J

an-1

3

8-J

an-1

3

15

-Jan

-13

22

-Jan

-13

29

-Jan

-13

5-F

eb-1

3

12

-Feb

-13

19

-Feb

-13

26

-Feb

-13

5-M

ar-1

3

12

-Mar

-13

19

-Mar

-13

26

-Mar

-13

stock return

market return

42

Table 3.5

ICICI GOLD ETF

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN


2

1-Jan-13 3014 3011 30860 30896 -0.09954 0.116656 -0.01161 0.013609

7-Jan-13 3011 3022 30896 30890 0.365327 -0.01942 -0.00709 0.000377

11-Jan-13 3022 2975 30890 30738 -1.55526 -0.49207 0.765295 0.242132

17-Jan-13 2975 3027 30738 30713 1.747899 -0.08133 -0.14216 0.006615

23-Jan-13 3027 3042 30713 30710 0.49554 -0.00977 -0.00484 9.54E-05

29-Jan-13 3042 2940 30710 30240 -3.35306 -1.53045 5.131673 2.342265

4-Feb-13 2940 2956.65 30240 30310 0.566327 0.231481 0.131094 0.053584

8-Feb-13 2956.65 2949 30310 30755 -0.25874 1.468162 -0.37987 2.155501

14-Feb-13 2949 2907 30755 30050 -1.42421 -2.29231 3.264735 5.254686

20-Feb-13 2907 2875 30050 29597 -1.10079 -1.50749 1.659429 2.272519

26-Feb-2013 2875 2860.05 29597 30055 -0.52 1.547454 -0.80468 2.394614

4-Mar-13 2860.05 2856 30055 29632 -0.14161 -1.40742 0.199299 1.98083

8-Feb-13 2856 2841 29632 29269 -0.52521 -1.22503 0.643397 1.500691

14-Mar-2013 2841 2874.95 29269 29379 1.195002 0.375824 0.449111 0.141244

20-Mar-2013 2874.95 2850 29379 29716 -0.86784 1.147078 -0.99548 1.315788

28-Mar-2013 2850 2850.05 29716 29477 0.001754 -0.80428 -0.00141 0.646867

SUM -5.4744 -4.4829 -0.17628 20.32142

BETA 0.438651

SD 1.200225 VAR 1.440541

Rp -0.34215 Rm -0.28018

43

Chart 3.5

Interpretation

As from the above it can be seen that the standard deviation (i.e. total risk associated with

stock) of ICICI GOLD ETF is 1.200225, where as the beta value is 0.438651. Here it means

that all risk associated with this stock can be eliminated with proper diversification of the

portfolio. Here the beta is less than one and it shows that the less volatility of the price of the

stock in comparison with the market returns. The average stock return is --0.34215 and the

average market return are -0.28018. It can be seen that there exist comparatively higher

difference between systematic and non systematic risk

-6

-5

-4

-3

-2

-1

0

1

2

3

1-J

an-1

3

8-J

an-1

3

15

-Jan

-13

22

-Jan

-13

29

-Jan

-13

5-F

eb-1

3

12

-Feb

-13

19

-Feb

-13

26

-Feb

-13

5-M

ar-1

3

12

-Mar

-13

19

-Mar

-13

26

-Mar

-13

market return

strock return

44

Table 3.6

IDBI GOLD ETF

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN


2

1-Jan-13 3010 3000 30860 30896 -0.33223 0.116656 -0.03876 0.013609

7-Jan-13 3000 3023 30896 30890 0.766667 -0.01942 -0.01489 0.000377

11-Jan-13 3023 3045.1 30890 30738 0.731062 -0.49207 -0.35973 0.242132

17-Jan-13 3045.1 3050 30738 30713 0.160914 -0.08133 -0.01309 0.006615

23-Jan-13 3050 3030 30713 30710 -0.65574 -0.00977 0.006405 9.54E-05

29-Jan-13 3030 2994.95 30710 30240 -1.15677 -1.53045 1.770368 2.342265

4-Feb-13 2994.95 3038.7 30240 30310 1.460792 0.231481 0.338146 0.053584

8-Feb-13 3038.7 3000 30310 30755 -1.27357 1.468162 -1.86981 2.155501

14-Feb-13 3000 2972 30755 30050 -0.93333 -2.29231 2.13949 5.254686

20-Feb-13 2972 2910.05 30050 29597 -2.08445 -1.50749 3.14229 2.272519

26-Feb-2013 2910.05 2915 29597 30055 0.1701 1.547454 0.263222 2.394614

4-Mar-13 2915 2910 30055 29632 -0.17153 -1.40742 0.24141 1.98083

8-Feb-13 2910 2926 29632 29269 0.549828 -1.22503 -0.67355 1.500691

14-Mar-2013 2926 2942 29269 29379 0.546822 0.375824 0.205509 0.141244

20-Mar-2013 2942 2960 29379 29716 0.611829 1.147078 0.701815 1.315788

28-Mar-2013 2960 2954.95 29716 29477 -0.17061 -0.80428 0.137217 0.646867

SUM -1.78021 -4.4829 -0.17628 20.32142

BETA 0.287288

SD 0.926053 VAR 0.857574

Rp -0.11126 Rm -0.28018

45

Chart 3.6

Interpretation


stock) of IDBI GOLD ETF is 0.926053, where as the beta value is only 0.287288. Here it

means that all risk associated with this stock can be eliminated with proper diversification of

the portfolio. Here also the beta value is less than one and it shows that the less volatility of

the price of the stock. The average stock return is -0.11126 and the average market return are

-0.28018

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

Y

X

46

Table 3.7

QUANTUM GOLD FUND

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN


2

1-Jan-13 1460.15 1460.6 30860 30896 0.030819 0.116656 0.003595 0.013609

7-Jan-13 1460.6 1450 30896 30890 -0.72573 -0.01942 0.014094 0.000377

11-Jan-13 1450 1456 30890 30738 0.413793 -0.49207 -0.20361 0.242132

17-Jan-13 1456 1464 30738 30713 0.549451 -0.08133 -0.04469 0.006615

23-Jan-13 1464 1446 30713 30710 -1.22951 -0.00977 0.01201 9.54E-05

29-Jan-13 1446 1444.85 30710 30240 -0.07953 -1.53045 0.121716 2.342265

4-Feb-13 1444.85 1449 30240 30310 0.287227 0.231481 0.066488 0.053584

8-Feb-13 1449 1430.15 30310 30755 -1.3009 1.468162 -1.90993 2.155501

14-Feb-13 1430.15 1415 30755 30050 -1.05933 -2.29231 2.428312 5.254686

20-Feb-13 1415 1388.05 30050 29597 -1.90459 -1.50749 2.871151 2.272519

26-Feb-2013 1388.05 1405.5 29597 30055 1.257159 1.547454 1.945396 2.394614

4-Mar-13 1405.5 1398 30055 29632 -0.53362 -1.40742 0.751024 1.98083

8-Feb-13 1398 1390 29632 29269 -0.57225 -1.22503 0.701017 1.500691

14-Mar-2013 1390 1488 29269 29379 7.05036 0.375824 2.649696 0.141244

20-Mar-2013 1488 1404 29379 29716 -5.64516 1.147078 -6.47544 1.315788

28-Mar-2013 1404 1406.5 29716 29477 0.178063 -0.80428 -0.14321 0.646867

SUM -3.28374 -4.4829 -0.17628 20.32142

BETA 0.097956

SD 2.478832 VAR 6.144607

Rp -0.20523 Rm -0.28018

47

Chart 3.7

Interpretation


stock) of QUANTUM GOLD ETF is 2.478832, where as the beta value is only 0.097956.

Here it means that all risk associated with this stock can be eliminated with proper

diversification of the portfolio. Here also the beta value is less than one and it shows that the

less volatility of the price of the stock. The average stock return is -0.20523 and the average

market return are -0.28018. It can be seen that there exist comparatively higher difference

between systematic and non systematic risk.

-8

-6

-4

-2

0

2

4

6

8

stock return

market return

48

Table 3.8

KOTAK GOLD ETF

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN


2

1-Jan-13 2926.05 2949.7 30860 30896 0.808257 0.116656 0.094288 0.013609

7-Jan-13 2949.7 2920 30896 30890 -1.00688 -0.01942 0.019554 0.000377

11-Jan-13 2920 2918 30890 30738 -0.06849 -0.49207 0.033703 0.242132

17-Jan-13 2918 2921.05 30738 30713 0.104524 -0.08133 -0.0085 0.006615

23-Jan-13 2921.05 2910.1 30713 30710 -0.37487 -0.00977 0.003662 9.54E-05

29-Jan-13 2910.1 2881.3 30710 30240 -0.98966 -1.53045 1.514616 2.342265

4-Feb-13 2881.3 2899 30240 30310 0.614306 0.231481 0.1422 0.053584

8-Feb-13 2899 2879 30310 30755 -0.68989 1.468162 -1.01288 2.155501

14-Feb-13 2879 2811 30755 30050 -2.36193 -2.29231 5.414279 5.254686

20-Feb-13 2811 2800 30050 29597 -0.39132 -1.50749 0.58991 2.272519

26-Feb-2013 2800 2791.5 29597 30055 -0.30357 1.547454 -0.46976 2.394614

4-Mar-13 2791.5 2780.15 30055 29632 -0.40659 -1.40742 0.572245 1.98083

8-Feb-13 2780.15 2765 29632 29269 -0.54493 -1.22503 0.66756 1.500691

14-Mar-2013 2765 2806.05 29269 29379 1.484629 0.375824 0.55796 0.141244

20-Mar-2013 2806.05 2772.05 29379 29716 -1.21167 1.147078 -1.38988 1.315788

28-Mar-2013 2772.05 2784.9 29716 29477 0.463556 -0.80428 -0.37283 0.646867

SUM -4.87453 -4.4829 -0.17628 20.32142

BETA 0.261751

SD 0.907169 VAR 0.822955

Rp -0.30466 Rm -0.28018

49

Chart 3.8

Interpretation


stock) of KOTAK GOLD ETF is 0.907169, where as the beta value is only 0.097956. Here it




-0.28018. It can be seen that there exist comparatively higher difference between systematic

and non systematic risk.

-5

-4

-3

-2

-1

0

1

2

stock return

market return

50

Table 3.9

RELIANCE GOLD FUND

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN


2

1-Jan-13 2869.8 2867 30860 30896 -0.09757 0.116656 -0.01138 0.013609

7-Jan-13 2867 2820.1 30896 30890 -1.63586 -0.01942 0.031768 0.000377

11-Jan-13 2820.1 2816 30890 30738 -0.14538 -0.49207 0.071539 0.242132

17-Jan-13 2816 2820 30738 30713 0.142045 -0.08133 -0.01155 0.006615

23-Jan-13 2820 2782.9 30713 30710 -1.3156 -0.00977 0.012851 9.54E-05

29-Jan-13 2782.9 2798.5 30710 30240 0.560566 -1.53045 -0.85792 2.342265

4-Feb-13 2798.5 2804 30240 30310 0.196534 0.231481 0.045494 0.053584

8-Feb-13 2804 2794.8 30310 30755 -0.3281 1.468162 -0.48171 2.155501

14-Feb-13 2794.8 2764 30755 30050 -1.10205 -2.29231 2.526233 5.254686

20-Feb-13 2764 2657 30050 29597 -3.8712 -1.50749 5.835787 2.272519

26-Feb-2013 2657 2701.15 29597 30055 1.661648 1.547454 2.571325 2.394614

4-Mar-13 2701.15 2694.5 30055 29632 -0.24619 -1.40742 0.346495 1.98083

8-Feb-13 2694.5 2699.5 29632 29269 0.185563 -1.22503 -0.22732 1.500691

14-Mar-2013 2699.5 2719.9 29269 29379 0.755695 0.375824 0.284009 0.141244

20-Mar-2013 2719.9 2705 29379 29716 -0.54781 1.147078 -0.62839 1.315788

28-Mar-2013 2705 2706 29716 29477 0.036969 -0.80428 -0.02973 0.646867

SUM -5.75075 -4.4829 -0.17628 20.32142

BETA 0.412593

SD 1.232358 VAR 1.518707

Rp -0.35942 Rm -0.28018

51

Chart 3.9

Interpretation


stock) of RELIANCE GOLD ETF is 1.232358, where as the beta value is only 0.412593.

Here it means that all risk associated with this stock can be eliminated with proper

diversification of the portfolio. Here also the beta value is less than one and it shows that the

less volatility of the price of the stock. The average stock return is -0.35942and the average

market return are -0.28018.

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

1-J

an-1

3

8-J

an-1

3

15

-Jan

-13

22

-Jan

-13

29

-Jan

-13

5-F

eb-1

3

12

-Feb

-13

19

-Feb

-13

26

-Feb

-13

5-M

ar-1

3

12

-Mar

-13

19

-Mar

-13

26

-Mar

-13

stock return

market return

52

Table 3.10

SBI GOLD FUND

STOCK PRICE

GOLD ETF

PRICE

STOCK

RETURN

MARKET

RETURN


2

1-Jan-13 2985.2 2980 30860 30896 -0.17419 0.116656 -0.02032 0.013609

7-Jan-13 2980 2972.5 30896 30890 -0.25168 -0.01942 0.004888 0.000377

11-Jan-13 2972.5 2985 30890 30738 0.420521 -0.49207 -0.20693 0.242132

17-Jan-13 2985 2998.9 30738 30713 0.465662 -0.08133 -0.03787 0.006615

23-Jan-13 2998.9 2975 30713 30710 -0.79696 -0.00977 0.007785 9.54E-05

29-Jan-13 2975 2988 30710 30240 0.436975 -1.53045 -0.66877 2.342265

4-Feb-13 2988 2971 30240 30310 -0.56894 0.231481 -0.1317 0.053584

8-Feb-13 2971 2947.9 30310 30755 -0.77752 1.468162 -1.14152 2.155501

14-Feb-13 2947.9 2901 30755 30050 -1.59096 -2.29231 3.646981 5.254686

20-Feb-13 2901 2875 30050 29597 -0.89624 -1.50749 1.351075 2.272519

26-Feb-2013 2875 2856 29597 30055 -0.66087 1.547454 -1.02267 2.394614

4-Mar-13 2856 2868 30055 29632 0.420168 -1.40742 -0.59135 1.98083

8-Feb-13 2868 2862 29632 29269 -0.20921 -1.22503 0.256282 1.500691

14-Mar-2013 2862 2881.05 29269 29379 0.665618 0.375824 0.250156 0.141244

20-Mar-2013 2881.05 2850 29379 29716 -1.07773 1.147078 -1.23624 1.315788

28-Mar-2013 2850 2888.85 29716 29477 1.363158 -0.80428 -1.09636 0.646867

SUM -3.2322 -4.4829 -0.17628 20.32142

BETA

-

0.08089

SD 0.776443 VAR 0.602864

Rp -0.20201 Rm -0.28018

53

Chart 3.10

Interpretation


stock) of SBI GOLD ETF is 0.776443, where as the beta value is only 0.08089. Here it




-0.28018.

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

1-J

an-1

3

8-J

an-1

3

15

-Jan

-13

22

-Jan

-13

29

-Jan

-13

5-F

eb-1

3

12

-Feb

-13

19

-Feb

-13

26

-Feb

-13

5-M

ar-1

3

12

-Mar

-13

19

-Mar

-13

26

-Mar

-13

stock return

market return

54

CORRELATION CO-EFFICIENT

Correlation co-efficient is an algebraic method of measuring correlation. Under this method,

we measure correlation by finding a value known as the co-efficient of correlation using an

appropriate formula. Correlation co-efficient is a numerical value. It shows the degree or the

extent of correlation between two variables.

55

CORRELATION CO-EFFICIENT OF STOCK RETURN AND MARKET RETURN


Table 3.11

DATE

STOCK

RETURN

(Y)

MARKET

RETURN

(X) XY X2 Y

2

1-Jan-13 -0.75534 0.116656 -0.08811 0.570539 0.013609

7-Jan-13 -0.39543 -0.01942 0.007679 0.156365 0.000377

11-Jan-13 0.164449 -0.49207 -0.08092 0.027043 0.242133

17-Jan-13 0.497512 -0.08133 -0.04046 0.247518 0.006615

23-Jan-13 -1.9802 -0.00977 0.019347 3.921192 9.55E-05

29-Jan-13 0.16835 -1.53045 -0.25765 0.028342 2.342277

4-Feb-13 1.680672 0.231481 0.389044 2.824658 0.053583

8-Feb-13 -2.63967 1.468162 -3.87546 6.967858 2.1555

14-Feb-13 -0.65362 -2.29231 1.4983 0.427219 5.254685

20-Feb-13 -2.50692 -1.50749 3.779157 6.284648 2.272526

26-Feb-2013 0.12445 1.547454 0.192581 0.015488 2.394614

4-Mar-13 1.852176 -1.40742 -2.60679 3.430556 1.980831

8-Feb-13 -1.4352 -1.22503 1.758163 2.059799 1.500699

14-Mar-2013 0.908536 0.375824 0.34145 0.825438 0.141244

20-Mar-2013 -0.80185 1.147078 -0.91978 0.642963 1.315788

28-Mar-2013 0.188147 -0.80428 -0.15132 0.035399 0.646866

Total -5.58394 -4.48292 -0.03479 28.46503 20.32144

n ∑xy - ∑x x∑ y

r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= -0.07113

Interpretation It can be seen from the above that there exist a negative correlation between stock return and

market return of BIRLA SUN LIFE GOLD ETF and the co efficient of correlation is -

0.07113. Correlation is said to be negative when the change in variables are in opposite

direction. Here it means that the stock return and market return of BIRLA SUN LIFE GOLD

ETF is in opposite direction.

56

GOLDMAN SACHS

Table 3.12

DATE

STOCK

RETURN(Y)

MARKET

RETURN(X) XY Y2

X2

1-Jan-13 -0.14256 0.116656 -0.01663 0.020323 0.013609

7-Jan-13 -0.4472 -0.01942 0.008685 0.199988 0.000377

11-Jan-13 0.552868 -0.49207 -0.27205 0.305663 0.242133

17-Jan-13 0.687285 -0.08133 -0.0559 0.472361 0.006615

23-Jan-13 -1.19113 -0.00977 0.011637 1.418791 9.55E-05

29-Jan-13 -0.34887 -1.53045 0.533928 0.12171 2.342277

4-Feb-13 0 0.231481 0 0 0.053583

8-Feb-13 -0.51993 1.468162 -0.76334 0.270327 2.1555

14-Feb-13 -1.49826 -2.29231 3.434476 2.244783 5.254685

20-Feb-13 -1.48391 -1.50749 2.236979 2.201989 2.272526

26-Feb-2013 0.231594 1.547454 0.358381 0.053636 2.394614

4-Mar-13 -0.07523 -1.40742 0.10588 0.00566 1.980831

8-Feb-13 -0.15774 -1.22503 0.193236 0.024882 1.500699

14-Mar-2013 1.400359 0.375824 0.526289 1.961005 0.141244

20-Mar-2013 -0.50283 1.147078 -0.57679 0.252838 1.315788

28-Mar-2013 -0.10321 -0.80428 0.08301 0.010652 0.646866

Total -3.598764 -4.482915 5.807798 9.564608 20.32144


r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= 0.688361814

Interpretation

It can be seen from the above that there exist a positive correlation between stock return and

market return of GOLDMAN SACHS and the co efficient of correlation is 0.688361814.

Correlation is said to be positive when the change in variables are in same direction. Here it

means that the stock return and market return of GOLDMAN SACHS is in the same

direction.

57


Table 3.13

DATE

STOCK

RETURN

MARKET

RETURN XY Y2

X2

1-Jan-13 -0.3919 0.116656 -0.04572 0.153586 0.013609

7-Jan-13 0.327869 -0.01942 -0.00637 0.107498 0.000377

11-Jan-13 -0.65359 -0.49207 0.321612 0.42718 0.242133

17-Jan-13 -1.31579 -0.08133 0.107013 1.731303 0.006615

23-Jan-13 1.466667 -0.00977 -0.01433 2.151112 9.55E-05

29-Jan-13 0.032852 -1.53045 -0.05028 0.001079 2.342277

4-Feb-13 -1.34647 0.231481 -0.31168 1.812981 0.053583

8-Feb-13 -3.46205 1.468162 -5.08285 11.98579 2.1555

14-Feb-13 1.724138 -2.29231 -3.95226 2.972652 5.254685

20-Feb-13 2.542373 -1.50749 -3.8326 6.46366 2.272526

26-Feb-2013 2.479339 1.547454 3.836663 6.147122 2.394614

4-Mar-13 -3.87097 -1.40742 5.448081 14.98441 1.980831

8-Feb-13 -0.73826 -1.22503 0.904391 0.545028 1.500699

14-Mar-2013 -0.10142 0.375824 -0.03812 0.010286 0.141244

20-Mar-2013 0.406091 1.147078 0.465818 0.16491 1.315788

28-Mar-2013 0 -0.80428 0 0 0

Total -2.901121 -4.48292 -2.25062 49.6586 19.67458


r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= -0.100

Interpretation

It can be seen from the above that there exist a negative correlation between stock return and

market return of CANARA ROBECO -GOLD ETF and the co efficient of correlation is -

0.100. Correlation is said to be negative when the change in variables are in opposite

direction. Here it means that the stock return and market return of CANARA ROBECO -

GOLD ETF is in opposite direction.

58

HDFC GOLD ETF

Table 3.14

DATE

STOCK

RETURN

MARKET

RETURN XY Y2

X2

1-Jan-13 0.933219 0.116656 0.108866 0.870898 0.013609

7-Jan-13 -1.40984 -0.01942 0.027379 1.987649 0.000377

11-Jan-13 -0.23279 -0.49207 0.114549 0.054191 0.242133

17-Jan-13 -2.33333 -0.08133 0.18977 5.444429 0.006615

23-Jan-13 -1.19113 -0.00977 0.011637 1.418791 9.55E-05

29-Jan-13 -0.34887 -1.53045 0.533928 0.12171 2.342277

4-Feb-13 0 0.231481 0 0 0.053583

8-Feb-13 -0.51993 1.468162 -0.76334 0.270327 2.1555

14-Feb-13 -1.49826 -2.29231 3.434476 2.244783 5.254685

20-Feb-13 -1.48391 -1.50749 2.236979 2.201989 2.272526

26-Feb-2013 0.231594 1.547454 0.358381 0.053636 2.394614

4-Mar-13 -0.07523 -1.40742 0.10588 0.00566 1.980831

8-Feb-13 -0.15774 -1.22503 0.193236 0.024882 1.500699

14-Mar-2013 1.400359 0.375824 0.526289 1.961005 0.141244

20-Mar-2013 -0.50283 1.147078 -0.57679 0.252838 1.315788

28-Mar-2013 -0.10321 -0.80428 0.08301 0.010652 0.646866

Total -7.291898 -4.482915 6.584254 16.92344 20.32144


r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= 0.282016342

Interpretation

It can be seen from the above that there exist a negative correlation between stock return and

market return of DFC GOLD ETF and the co efficient of correlation is0.282016342.


means that the stock return and market return of DFC GOLD ETF is in the same direction.

59

ICICI GOLD ETF

Table 3.15

DATE

STOCK

RETURN

MARKET

RETURN XY Y2

X2

1-Jan-13 -0.09954 0.116656 -0.01161 0.009908 0.013609

7-Jan-13 0.365327 -0.01942 -0.00709 0.133464 0.000377

11-Jan-13 -1.55526 -0.49207 0.765297 2.418834 0.242133

17-Jan-13 1.747899 -0.08133 -0.14216 3.055151 0.006615

23-Jan-13 0.49554 -0.00977 -0.00484 0.24556 9.55E-05

29-Jan-13 -3.35306 -1.53045 5.131691 11.24301 2.342277

4-Feb-13 0.566327 0.231481 0.131094 S0.320726 0.053583

8-Feb-13 -0.25874 1.468162 -0.37987 0.066946 2.1555

14-Feb-13 -1.42421 -2.29231 3.264731 2.028374 5.254685

20-Feb-13 -1.10079 -1.50749 1.65943 1.211739 2.272526

26-Feb-2013 -0.52 1.547454 -0.80468 0.2704 2.394614

4-Mar-13 -0.14161 -1.40742 0.199305 0.020053 1.980831

8-Feb-13 -0.52521 -1.22503 0.643398 0.275846 1.500699

14-Mar-2013 1.195002 0.375824 0.44911 1.42803 0.141244

20-Mar-2013 -0.86784 1.147078 -0.99548 0.753146 1.315788

28-Mar-2013 0.001754 -0.80428 -0.00141 3.08E-06 0.646866

Total -5.57395 -4.48292 9.896916 23.160464 20.32144


r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= 0.412035535

Interpretation


market return of ICICI GOLD ETF and the co efficient of correlation is 0.412035535.


means that the stock return and market return of ICIC GOLD ETF is in the same direction.

60

IDBI GOLD ETF

Table 3.16

DATE

STOCK

RETURN

MARKET

RETURN XY Y2

X2

1-Jan-13 -0.33223 0.116656 -0.03876 0.110377 0.013609

7-Jan-13 0.766667 -0.01942 -0.01489 0.587778 0.000377

11-Jan-13 0.731062 -0.49207 -0.35973 0.534452 0.242133

17-Jan-13 0.160914 -0.08133 -0.01309 0.025893 0.006615

23-Jan-13 -0.65574 -0.00977 0.006407 0.429995 9.55E-05

29-Jan-13 -1.15677 -1.53045 1.770379 1.338117 2.342277

4-Feb-13 1.460792 0.231481 0.338146 2.133913 0.053583

8-Feb-13 -1.27357 1.468162 -1.86981 1.621981 2.1555

14-Feb-13 -0.93333 -2.29231 2.139482 0.871105 5.254685

20-Feb-13 -2.08445 -1.50749 3.142288 4.344932 2.272526

26-Feb-2013 0.1701 1.547454 0.263222 0.028934 2.394614

4-Mar-13 -0.17153 -1.40742 0.241415 0.029423 1.980831

8-Feb-13 0.549828 -1.22503 -0.67356 0.302311 1.500699

14-Mar-2013 0.546822 0.375824 0.205509 0.299014 0.141244

20-Mar-2013 0.611829 1.147078 0.701816 0.374335 1.315788

28-Mar-2013 -0.17061 -0.80428 0.137218 0.029108 0.646866

Total -1.78022 -4.48292 5.976042 13.06167 20.32144


r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= 0.3497515

Interpretation


market return of IDBI GOLD ETF and the co efficient of correlation is 0.3497515.


means that the stock return and market return of IDBI GOLD ETF is in the same direction.

61

QUANTUM GOLD FUND

Table 3.17

DATE

STOCK

RETURN

MARKET

RETURN XY Y2

X2

1-Jan-13 0.030819 0.116656 0.003595 0.00095 0.013609

7-Jan-13 -0.72573 -0.01942 0.014094 0.526684 0.000377

11-Jan-13 0.413793 -0.49207 -0.20362 0.171225 0.242133

17-Jan-13 0.549451 -0.08133 -0.04469 0.301896 0.006615

23-Jan-13 -1.22951 -0.00977 0.012012 1.511695 9.55E-05

29-Jan-13 -0.07953 -1.53045 0.121717 0.006325 2.342277

4-Feb-13 0.287227 0.231481 0.066488 0.082499 0.053583

8-Feb-13 -1.3009 1.468162 -1.90993 1.692341 2.1555

14-Feb-13 -1.05933 -2.29231 2.428313 1.12218 5.254685

20-Feb-13 -1.90459 -1.50749 2.87115 3.627463 2.272526

26-Feb-2013

1.257159

1.547454 1.945396 1.580449 2.394614

4-Mar-13 -0.53362 -1.40742 0.751027 0.28475 1.980831

8-Feb-13 -0.57225 -1.22503 0.701023 0.32747 1.500699

14-Mar-2013 7.05036 0.375824 2.649694 49.70758 0.141244

20-Mar-2013 -5.64516 1.147078 -6.47544 31.86783 1.315788

28-Mar-2013 0.178063 -0.80428 -0.14321 0.031706 0.646866

Total -3.46181 -3.67864 2.787619 92.84304 20.32144


r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= 0.04455154

Interpretation


market return of QUANTUM GOLD FUND and the co efficient of correlation is

0.04455154. Correlation is said to be positive when the change in variables are in same

direction. Here it means that the stock return and market return of QUANTUM GOLD

FUND is in the same direction.

62

KOTAK GOLD ETF

Table 3.18

DATE

STOCK

RETURN

MARKET

RETURN XY Y2

X2

1-Jan-13 0.808257 0.116656 0.094288 0.653279 0.013609

7-Jan-13 -1.00688 -0.01942 0.019554 1.013807 0.000377

11-Jan-13 -0.06849 -0.49207 0.033702 0.004691 0.242133

17-Jan-13 0.104524 -0.08133 -0.0085 0.010925 0.006615

23-Jan-13 -0.37487 -0.00977 0.003662 0.140528 9.55E-05

29-Jan-13 -0.98966 -1.53045 1.514625 0.979427 2.342277

4-Feb-13 0.614306 0.231481 0.1422 0.377372 0.053583

8-Feb-13 -0.68989 1.468162 -1.01287 0.475948 2.1555

14-Feb-13 -2.36193 -2.29231 5.414276 5.578713 5.254685

20-Feb-13 -0.39132 -1.50749 0.589911 0.153131 2.272526

26-Feb-2013 -0.30357 1.547454 -0.46976 0.092155 2.394614

4-Mar-13 -0.40659 -1.40742 0.572243 0.165315 1.980831

8-Feb-13 -0.54493 -1.22503 0.667556 0.296949 1.500699

14-Mar-2013 1.484629 0.375824 0.557959 2.204123 0.141244

20-Mar-2013 -1.21167 1.147078 -1.38988 1.468144 1.315788

28-Mar-2013 0.463556 -0.80428 -0.37283 0.214884 0.646866

Total -4.87453 0.325294522 -4.48292 13.82939 20.32144


r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= 0.325294522

Interpretation It can be seen from the above that there exist a positive correlation between stock return and

market return of KOTAK GOLD ETF and the co efficient of correlation is 0.325294522.


means that the stock return and market return of KOTAK GOLD ETF is in the same

direction.

63

RELIANCE GOLD FUND

Table 3.19

DATE

STOCK

RETURN

MARKET

RETURN XY Y2

X2

1-Jan-13 -0.09757 0.116656 -0.01138 0.00952 0.013609

7-Jan-13 -1.63586 -0.01942 0.031768 2.676038 0.000377

11-Jan-13 -0.14538 -0.49207 0.071537 0.021135 0.242133

17-Jan-13 0.142045 -0.08133 -0.01155 0.020177 0.006615

23-Jan-13 -1.3156 -0.00977 0.012853 1.730803 9.55E-05

29-Jan-13 0.560566 -1.53045 -0.85792 0.314234 2.342277

4-Feb-13 0.196534 0.231481 0.045494 0.038626 0.053583

8-Feb-13 -0.3281 1.468162 -0.4817 0.10765 2.1555

14-Feb-13 -1.10205 -2.29231 2.52624 1.214514 5.254685

20-Feb-13 -3.8712 -1.50749 5.835795 14.98619 2.272526

26-Feb-2013

1.661648

1.547454 2.571324 2.761074 2.394614

4-Mar-13 -0.24619 -1.40742 0.346493 0.06061 1.980831

8-Feb-13 0.185563 -1.22503 -0.22732 0.034434 1.500699

14-Mar-2013 0.755695 0.375824 0.284008 0.571075 0.141244

20-Mar-2013 -0.54781 1.147078 -0.62838 0.300096 1.315788

28-Mar-2013 0.036969 -0.80428 -0.02973 0.001367 0.646866

Total

20.32144


r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= 0.377453119

Interpretation It can be seen from the above that there exist a positive correlation between stock return and

market return of RELIANCE GOLD FUND and the co efficient of correlation is

0.377453119. Correlation is said to be positive when the change in variables are in same

direction. Here it means that the stock return and market return of RELIANCE GOLD FUND

is in the same direction.

64

SBI GOLD FUND

Table 3.20

DATE

STOCK

RETURN

MARKET

RETURN XY Y2

X2

1-Jan-13 -0.17419 0.116656 -0.02032 0.030342 0.013609

7-Jan-13 -0.25168 -0.01942 0.004888 0.063343 0.000377

11-Jan-13 0.420521 -0.49207 -0.20693 0.176838 0.242133

17-Jan-13 0.465662 -0.08133 -0.03787 0.216841 0.006615

23-Jan-13 -0.79696 -0.00977 0.007786 0.635145 9.55E-05

29-Jan-13 0.436975 -1.53045 -0.66877 0.190947 2.342277

4-Feb-13 -0.56894 0.231481 -0.1317 0.323693 0.053583

8-Feb-13 -0.77752 1.468162 -1.14153 0.604537 2.1555

14-Feb-13 -1.59096 -2.29231 3.646974 2.531154 5.254685

20-Feb-13 -0.89624 -1.50749 1.351073 0.803246 2.272526

26-Feb-2013

-0.66087

1.547454 -1.02267 0.436749 2.394614

4-Mar-13 0.420168 -1.40742 -0.59135 0.176541 1.980831

8-Feb-13 -0.20921 -1.22503 0.256289 0.043769 1.500699

14-Mar-2013 0.665618 0.375824 0.250155 0.443047 0.141244

20-Mar-2013 -1.07773 1.147078 -1.23624 1.161502 1.315788

28-Mar-2013 1.363158 -0.80428 -1.09636 1.8582 0.646866

Total -4.59536 -3.67864 -0.63658 9.695894 20.32144


r = ______________________

√n∑x^2- (∑x^2) √n∑y^2 –(∑y^2)

= 0.11745037

Interpretation It can be seen from the above that there exist a negative correlation between stock return and

market return of SBI GOLD FUND and the co efficient of correlation is -0.11745037.

Correlation is said to be negative when the change in variables are in opposite direction.

65

TREND RATIO

The trend analysis method determines the direction upwards or downwards and involves the

computation of the percentage relationship that each statement item bears to the same item in

base year. The information for number of years is taken up and one year, generally the 1st

year is taken as base year.

TREND INDEX OF NET ASSET VALUE OF GOLD FUND


Table 3.21

DATE NAV

TREND INDEX

1-Jan-13 3022 100

7-Jan-13 3010.05 99.605

11-Jan-13 3015 99.768

17-Jan-13 3030 100.26

23-Jan-13 2970 98.279

29-Jan-13 2975 98.445

4-Feb-13 3025 100.1

8-Feb-13 2945.15 97.457

14-Feb-13 2925.9 96.82

20-Feb-13 2852.55 94.393

26-Feb-2013 2856.1 94.51

4-Mar-13 2909 96.261

8-Mar-13 2867.25 94.879

14-Mar-2013 2893.3 95.741

20-Mar-2013 2870.1 94.974

28-Mar-2013 2875.5 95.152

66

Chart 3.11

Interpretation

As from the above it can be seen that the trend index of net asset value of BIRLA SUN LIFE

GOLD ETF decreasing trend. On 7-Jan-13 the trend had been decreased to 99.605 and during

the subsequent date 11-Jan-13 the same had been decreased to 99.768. While analyzing the

trend it can be seen that on 17-Jan-13 the trend had been increased to 100.26. On 23-Jan-13

and 29-Jan-13 the trend were 98.279 and 98.445 respectively. During the month of February

the trend were 100.1, 97.457, 96.82, 94.393 and 94.51 respectively. For the month of March

the trend were 96.261, 94.879, 95.741, 94.974and respectively.

91

92

93

94

95

96

97

98

99

100

101

TREND INDEX

67


Table 3.22

DATE

NAV TREND INDEX

1-Jan-13 3050 100

7-Jan-13 3060 100.33

11-Jan-13 3040 99.672

17-Jan-13 3000 98.361

23-Jan-13 3044 99.803

29-Jan-13 3045 99.836

4-Feb-13 3004 98.492

8-Feb-13 2900 95.082

14-Feb-13 2950 96.721

20-Feb-13 3025 99.18

26-Feb-2013 3100 101.64

4-Mar-13 2980 97.705

8-Feb-13 2958 96.984

14-Mar-2013 2955 96.885

20-Mar-2013 2967 97.279

28-Mar-2013 2967 97.279

68

Chart 3.12

Interpretation

As from the above it can be seen that the trend index of net asset value of CANARA

ROBECO -GOLD ETF decreasing trend. On 7-Jan-13 the trend had been increased to 100.33

and during the subsequent date 11-Jan-13 the same had been decreased to 99.672. While

analyzing the trend it can be seen that on 17-Jan-13 the trend had been decreased to 98.361.

On 23-Jan-13 and 29-Jan-13 the trend were 99.803 and 99.836 respectively. During the

month of February the trend were 98.492, 95.082, 96.721, 99.18 and 101.64 respectively. For

the month of March the trend were 97.705, 96.984, 96.885 and 97.279 and respectively.

90

92

94

96

98

100

102

104

TREND INDEX

69

GOLDMAN SACHS

Table 3.23

DATE

NAV TREND INDEX

1-Jan-13 2907 100

7-Jan-13 2894 99.553

11-Jan-13 2910 100.1

17-Jan-13 2930 100.79

23-Jan-13 2895.1 99.591

29-Jan-13 2885 99.243

4-Feb-13 2885 99.243

8-Feb-13 2870 98.727

14-Feb-13 2827 97.248

20-Feb-13 2785.05 95.805

26-Feb-2013 2791.5 96.027

4-Mar-13 2789.4 95.955

8-Feb-13 2785 95.803

14-Mar-2013 2824 97.145

20-Mar-2013 2809.8 96.656

28-Mar-2013 2806.9 96.557

70

Chart 3.13

Interpretation

As from the above it can be seen that the trend index of net asset value of GOLDMAN

SACHS decreasing trend. On 7-Jan-13 the trend had been decreased to 99.553 and during the

subsequent date 11-Jan-13 the same had been increased to 100.1. While analyzing the trend it

can be seen that on 17-Jan-13 the trend had been increased to 100.79. On 23-Jan-13 and 29-

Jan-13 the trend were 99.591 and 99.243 respectively. During the month of February the

trend were 99.243, 98.727, 97.248, 95.805 and 96.027 respectively. For the month of March

the trend were 95.955, 95.803, 97.145, 96.656 and 96.557 respectively.

93

94

95

96

97

98

99

100

101

102

TREND INDEX

71

HDFC GOLD ETF

Table 3.34

DATE

STOCK RETURN TREND INDEX

1-Jan-13 3050 100

7-Jan-13 3007 98.59

11-Jan-13 3000 98.361

17-Jan-13 2930 96.066

23-Jan-13 2895.1 94.921

29-Jan-13 2885 94.59

4-Feb-13 2885 94.59

8-Feb-13 2870 94.098

14-Feb-13 2827 92.689

20-Feb-13 2785.05 91.313

26-Feb-2013 2791.5 91.525

4-Mar-13 2789.4 91.456

8-Feb-13 2785 91.311

14-Mar-2013 2824 92.59

20-Mar-2013 2809.8 92.125

28-Mar-2013 2806.9 92.03

72

Chart 3.14

Interpretation

As from the above it can be seen that the trend index of net asset value of HDFC GOLD EYF

on 7-Jan-13 had been decreased to 98.59 and during the subsequent date 11-Jan-13 the same

had been decreased to 98.361. While analyzing the trend it can be seen that on 17-Jan-13 the

trend had been decreased to 96.066. On 23-Jan-13 and 29-Jan-13 the trend were 94.921 and

94.59 respectively. During the month of February the trend were 94.59, 94.098, 92.689,

91.313 and 91.525 respectively. For the month of March the trend were 91.456, 91.311.,

92.59, 92.125 and 92.03 respectively.

86

88

90

92

94

96

98

100

73

ICICI GOLD ETF

Table 3.25

DATE NAV

TREND INDEX

1-Jan-13 3011 100

7-Jan-13 3022 100.37

11-Jan-13 2975 98.804

17-Jan-13 3027 100.53

23-Jan-13 3042 101.03

29-Jan-13 2940 97.642

4-Feb-13 2956.65 98.195

8-Feb-13 2949 97.941

14-Feb-13 2907 96.546

20-Feb-13 2875 95.483

26-Feb-2013 2860.05 94.987

4-Mar-13 2856 94.852

8-Feb-13 2841 94.354

14-Mar-2013 2874.95 95.482

20-Mar-2013 2850 94.653

28-Mar-2013 2850.05 94.655

74

Chart 3.15

Interpretation

As from the above it can be seen that the trend index of net asset value of ICICI GOLD ETF

on 7-Jan-13 had been increased to 100.37and during the subsequent date 11-Jan-13 the same

had been decreased to 98. 804. While analyzing the trend it can be seen that on 17-Jan-13 the

trend had been increased to 100.53. On 23-Jan-13 and 29-Jan-13 the trend were 101.03 and

97.642 respectively. During the month of February the trend were 98.185, 97.941, 96.546,

95.483 and 94.987 respectively. For the month of March the trend were 94.852, 94.354.,

95.482, 94.653 and 94.655 respectively.

90

92

94

96

98

100

102

75

IDBI GOLD ETF

Table 3.26

DATE

NAV TREND INDEX

1-Jan-13 3000 100

7-Jan-13 3023 100.77

11-Jan-13 3045.1 101.5

17-Jan-13 3050 101.67

23-Jan-13 3030 101

29-Jan-13 2994.95 99.832

4-Feb-13 3038.7 101.29

8-Feb-13 3000 100

14-Feb-13 2972 99.067

20-Feb-13 2910.05 97.002

26-Feb-2013 2915 97.167

4-Mar-13 2910 97

8-Feb-13 2926 97.533

14-Mar-2013 2942 98.067

20-Mar-2013 2960 98.667

28-Mar-2013 2954.95 98.498

76

Chart 3.16

Interpretation

As from the above it can be seen that the trend index of net asset value of IDBI GOLD ETF

on 7-Jan-13 had been increased to 100.77 and during the subsequent date 11-Jan-13 the same

had been increased to 101.5. While analyzing the trend it can be seen that on 17-Jan-13 the

trend had been increased to 101.67. On 23-Jan-13 and 29-Jan-13 the trend were 101 and

99.832 respectively. During the month of February the trend were 101.29, 100, 99.067,

97.002 and 97.167 respectively. For the month of March the trend were 97, 97.533., 98.067,

98.667 and 98.498 respectively.

94

95

96

97

98

99

100

101

102

103

77

QUANTUM GOLD FUND

Table 3.27

DATE

NAV TREND INDEX

1-Jan-13 1460.6 100

7-Jan-13 1450 99.274

11-Jan-13 1456 99.685

17-Jan-13 1464 100.23

23-Jan-13 1446 99

29-Jan-13 1444.85 98.922

4-Feb-13 1449 99.206

8-Feb-13 1430.15 97.915

14-Feb-13 1415 96.878

20-Feb-13 1388.05 95.033

26-Feb-2013 1405.5 96.228

4-Mar-13 1398 95.714

8-Feb-13 1390 95.166

14-Mar-2013 1488 101.88

20-Mar-2013 1404 96.125

28-Mar-2013 1406.5 96.296

78

Chart 3.17

Interpretation

As from the above it can be seen that the trend index of net asset value of QUANTUM

GOLD FUND on 7-Jan-13 had been decreased to 99.274 and during the subsequent date 11-

Jan-13 the same had been decreased to 99.685. While analyzing the trend it can be seen that

on 17-Jan-13 the trend had been increased to 100.23. On 23-Jan-13 and 29-Jan-13 the trend

were 99 and 98.922 respectively. During the month of February the trend were 99.206,

97.915, 96.878, 95.033 and 96.228 respectively. For the month of March the trend were

95.714, 95.166., 101.88, 96.125 and 96.296 respectively.

90

92

94

96

98

100

102

104

79

KOTAK GOLD ETF Table 3.28

DATE

NAV TREND INDEX

1-Jan-13 2949.7 100

7-Jan-13 2920 98.993

11-Jan-13 2918 98.925

17-Jan-13 2921.05 99.029

23-Jan-13 2910.1 98.657

29-Jan-13 2881.3 97.681

4-Feb-13 2899 98.281

8-Feb-13 2879 97.603

14-Feb-13 2811 95.298

20-Feb-13 2800 94.925

26-Feb-2013 2791.5 94.637

4-Mar-13 2780.15 94.252

8-Feb-13 2765 93.738

14-Mar-2013 2806.05 95.13

20-Mar-2013 2772.05 93.977

28-Mar-2013 2784.9 94.413

80

Chart 3.18

Interpretation

As from the above it can be seen that the trend index of net asset value of KOTAK GOLD

ETF on 7-Jan-13 had been decreased to 98.993 and during the subsequent date 11-Jan-13 the

same had been decreased to 98.925. While analyzing the trend it can be seen that on 17-Jan-

13 the trend had been again decreased to 99.029. On 23-Jan-13 and 29-Jan-13 the trend were

98.657 and 97.681 respectively. During the month of February the trend were 98.281, 97.603,

95.298, 94.925 and 94.637 respectively. For the month of March the trend were 94.252,

93.738, 95.13, 93.977 and 94.413 respectively.

90

91

92

93

94

95

96

97

98

99

100

101

TREND INDEX

81

RELIANCE GOLD FUND

Table 3.29

DATE

NAV TREND INDEX

1-Jan-13 2867 100

7-Jan-13 2820.1 98.364

11-Jan-13 2816 98.221

17-Jan-13 2820 98.361

23-Jan-13 2782.9 97.067

29-Jan-13 2798.5 97.611

4-Feb-13 2804 97.803

8-Feb-13 2794.8 97.482

14-Feb-13 2764 96.407

20-Feb-13 2657 92.675

26-Feb-2013 2701.15 94.215

4-Mar-13 2694.5 93.983

8-Feb-13 2699.5 94.158

14-Mar-2013 2719.9 94.869

20-Mar-2013 2705 94.349

28-Mar-2013 2706 94.384

82

Chart 3.19

Interpretation

As from the above it can be seen that the trend index of net asset value of RELIANCE GOLD

FUND on 7-Jan-13 had been decreased to 98.364 and during the subsequent date 11-Jan-13

the same had been decreased to 98.221. While analyzing the trend it can be seen that on 17-

Jan-13 the trend had been again decreased to 98.361. On 23-Jan-13 and 29-Jan-13 the trend

were 97.067 and 97.611 respectively. During the month of February the trend were 97.803,

97.482, 96.407, 92.675 and 94.215 respectively. For the month of March the trend were

93.983, 94.158, 94.869, 94.349 and 94.384 respectively

88

90

92

94

96

98

100

102

TREND INDEX

83

SBI GOLD FUND

Table 3.30

DATE

NAV TREND INDEX

1-Jan-13 2980 100

7-Jan-13 2972.5 99.748

11-Jan-13 2985 100.17

17-Jan-13 2998.9 100.63

23-Jan-13 2975 99.832

29-Jan-13 2988 100.27

4-Feb-13 2971 99.698

8-Feb-13 2947.9 98.923

14-Feb-13 2901 97.349

20-Feb-13 2875 96.477

26-Feb-2013 2856 95.839

4-Mar-13 2868 96.242

8-Feb-13 2862 96.04

14-Mar-2013 2881.05 96.68

20-Mar-2013 2850 95.638

28-Mar-2013 2888.85 96.941

84

Chart 3.20

Interpretation

As from the above it can be seen that the trend index of net asset value of SBI GOLD FUND

on 7-Jan-13 had been decreased to 99.748 and during the subsequent date 11-Jan-13 the same

had been increased to 100.17. While analyzing the trend it can be seen that on 17-Jan-13 the

trend had been again increased to 100.63. On 23-Jan-13 and 29-Jan-13 the trend were 99.832

and 100.27 respectively. During the month of February the trend were 99.698, 98.923,

97.349, 96.477 and 95.839 respectively. For the month of March the trend were 96.242,

96.04, 96.68, 95.638 and 96.941 respectively

93

94

95

96

97

98

99

100

101

102

TREND INDEX

85

PERFORMANCE RANKING

SHARPE RATIO ANALYSIS

The Sharpe’s performance measurement of risk premium of portfolio. His measure adjusts

the performance of risk. Thus Sharpe’s index is given by following equation.

S = Rp - Rs

S.D

Where,

St = Sharpe Index

Rp = Average Return of Portfolio ‘y’

Rs = Risk less rate of interest

= Standard deviation of risk of the return of portfolio ‘t’

The risk premium is the return required by investors for assumption of risk

relative to the total amount of the risk in the portfolio.

86

Table 3.31

FUNDS Rp Rf SHARPE RATIO RANK

BIRLA SUN LIFE -0.349 7 1.32 -5.56742424 3

KOTAK GOLD -0.304 7 0.907 -8.05292172 8

SBI GOLD -0.202 7 0.77 -9.35324675 9

QUANTUM GOLD -0.205 7 2.47 -2.91700405 1

ICICI

PRUDENTIAL

GOLD

0.209 7 1.2 -5.65916667 4

RELIANCE GOLD -0.359 7 1.23 -5.98292683 5

CANARA

ROBECO -0.181 7 1.8 -3.98944444 2

IDBI GOLD -0.111 7 0.926 -7.67926566 6

HDFC GOLD -0.455 7 0.952 -7.83088235 7

GOLMAN SACHS -0.224 7 0.763 -9.46788991 10

87

Interpretation

From the above table, it can be seen that the performance of QUANTUM GOLD is better

than the other funds, because its index is higher than that of others. While CANARA

ROBECO came in the 2nd

place, BIRLA SUN LIFE came in the 3rd

place. GOLMAN

SACHS came in the last place as its index under Sharpe ratio analysis is lower than that of

other funds.

88

TREYNOR RATIO ANALYSIS

Treynor’s model is on the concept of the characteristic straight line. According to his model,

the inter section at 450 angle represents that return which is equivalent to the return on the

line is higher than that which is earned on the market portfolio. Thus Treynor’s Ratio is given

by the following equation.

Symbolically, Tp = Rp-Rf β

Where,

Tn = Treynor’s Index

Rp = Average Return of portfolio.

Rf = Risk less rate of return

= Beta coefficient of portfolio.

89

Table 3.32

FUNDS Rp Rf TREYNOR

RATIO RANK

BIRLA SUN LIFE -0.349 7 -0.083 88.5421687 2

KOTAK GOLD -0.304 7 0.261 -27.9846743 7

SBI GOLD -0.202 7 -0.08 90.025 1

QUANTUM

GOLD -0.205 7 0.097 -74.2783505 10

ICICI

PRUDENTIAL

GOLD

0.209 7 0.438 -15.5045662 4

RELIANCE GOLD -0.359 7 0.412 -17.8616505 5

CANARA

ROBECO -0.181 7 -0.16 44.88125 3

IDBI GOLD -0.111 7 0.287 -24.7770035 6

HDFC GOLD -0.455 7 0.238 -31.3235294 9

GOLMAN SACHS -0.224 7 0.251 -28.7808765 8

90

Interpretation

As from the above table, it can be seen that the SBI Gold is having high Treynor Ratio. From

this it can be ascertained that the performance of SBI Gold is higher than that of other funds.

While BIRLA SUN LIFE came in the second place, The QUANTUM GOLD came in the last

place and thus it had been assigned by Rank 10.

91

JENSEN INDEX

Jensen’s model is similar to the Sharpe’s Index Model and the Treyner’s index model but it

shows that performance on a portfolio can be on any point including the origin. Thus Jensen’s

model is given by following equation.

Jensen’s Index = Rf + (Rm – Rf)

Where,

Rp = Average Return on portfolio.

RF = Risk less ratio of interest

= Beta co-efficient of portfolio.

92

Table 3.33

SECURITIES Rp Rf Rm JENSEN

INDEX RANK

BIRLA SUN LIFE -0.349 7 -0.083 -0.28 7.60424 2

KOTAK GOLD -0.304 7 0.261 -0.28 5.09992 6

SBI GOLD -0.202 7 -0.08 -0.28 7.5824 3

QUANTUM GOLD -0.205 7 0.097 -0.28 6.29384 4

ICICI PRUDENTIAL

GOLD 0.209 7 0.438 -0.28 3.81136 10

RELIANCE GOLD -0.359 7 0.412 -0.28 4.00064 9

CANARA ROBECO -0.181 7 -0.16 -0.28 8.1648 1

IDBI GOLD -0.111 7 0.287 -0.28 4.91064 8

HDFC GOLD -0.455 7 0.238 -0.28 5.26736 5

GOLMAN SACHS -0.224 7 0.251 -0.28 5.17272 7

93

Interpretation

From the above table it can be seen that the CANARA ROBECO has the highest Jenson

Index. Thus it had been assigned Rank 1. While BIRLA SUN LIFE came in the second place,

SBI GOLD came in the third place, RELIANCE GOLD came in the 9th

place and ICICI

PRUDENTIAL GOLD came in the 10th

position.

94

Table 3.34

SECURITIES SD Rp Rm

BIRLA SUN LIFE 1.329568 -0.08389 -0.349 -0.28018

CANARA ROBECO 1.809835 -0.16068 -0.18132

-0.28018

GOLMAN SACHS 0.763987 0.251737 -0.22492

-0.28018

HDFC GOLD 0.952197 0.238189 -0.45574

-0.28018

ICICI PRUDENTIAL

GOLD 1.200225 0.438651 -0.34215

-0.28018

IDBI GOLD 0.926053 0.287288 -0.11126

-0.28018

QUANTUM GOLD 2.478832 0.097956 -0.20523

-0.28018

KOTAK GOLD 0.907169 0.261751 -0.30466

-0.28018

RELIANCE GOLD 1.232358 0.412593 -0.35942

-0.28018

SBI GOLD 0.776443 0.8089 -0.20201

-0.28018

95

Interpretation

As from the above it can be seen that the standard deviation of QUANTUM GOLD is the

highest and the value of is highest ICICI PRUDENTIAL GOLD. The stock return is

highest in the case of IDBI GOLD.

96

CHAPTER 4

FINDINGS

The major findings of the study are the following.

1) It was found that the S.D of BIRLA SUN LIFE was 1.329568 and the value of was -

0.08389.

2) It was found that the S.D of CANARA ROBECO was1.809835 and the value of

were -0.16068.

3) It was found that the S.D of GOLMAN SACHS was 0.763987 and the value of was

0.251737.

4) It was found that the S.D of HDFC GOLD was 0.95217 and the value of was

0.238189.

5) It was found that the S.D of ICICI PRUDENTIAL GOLD was 1.200225 and the value

of was 0.438651.

6) It was found that the S.D of IDBI GOLD was 0.926053 and the value of was

0.287288.

7) It was found that the S.D of QUANTUM GOLD was 2.478832 and the value of was

0.097956.

8) It was found that the S.D of KOTAK GOLD was 0.907169 and the value of was

0.261751.

9) It was found that the S.D of RELIANCE GOLD was 1.232358 and the value of was

0.412593.

10) It was found that the S.D of SBI GOLD was 0.776443 and the value of was 0.8089.

11) It was found that there exist a negative correlation between stock return and market

return of BIRLA SUN LIFE GOLD ETF.


return of CANARA ROBECO.

13) It was found that there exist a positive correlation between stock return and market

return of GOLMAN SACHS.


return of HDFC GOLD.

97


return of ICICI PRUDENTIAL GOLD.


return of IDBI GOLD.


return of QUANTUM GOLD.


return of KOTAK GOLD.


return of RELIANCE GOLD.


return of SBI GOLD.

21) It was found that the trend index of net asset value of all the securities shows a

decreasing trend.

22) It was found that on the basis of SHARPE RATIO the performance of QUANTUM

GOLD is better than the other funds.

23) SBI Gold is having high Treynor Ratio.

24) CANARA ROBECO has the highest Jenson Index.

98

SUGGESTIONS

1. The investor should utilize technical fundamental analysis of stock market to make

decisions on gold fund investment.

2. Gold fund investment decisions should be made after deeply studying the economic

changes in the concerned country.

3. Investor should analyse and assess the financial security of the institution in which he is

going to make gold fund investment.

4.Gold is a commodity whose value fluctuates in the market than other securities hence the

volatility of gold funds should be studied.

5. By doing frequent risk return analysis of gold fund an investor can reduce risk in the same.

6. Portfolio of investor can be made defensive by including gold funds during portfolio

construction.

99

CHAPTER 5

CONCLUSION

Gold commodity exchange traded funds are a simple way to expose your investment strategy

to the performance of gold, without actually owning any gold products. There are many types

of gold ETFs, some of which consist of futures and derivative contracts in order to track the

price of gold and gold-related indexes, while others consist of gold assets held in a trust.

There are even gold ETFs that track companies in the gold industry. For example, one of the

most popular gold ETFs is GLD, the SPDR Gold Shares ETF. In the case of the SPDR gold

ETF, you do not actually own the gold assets, they are held by a Trust. The Trust issues

baskets in exchange for deposits of gold for when the baskets are redeemed. So, you have

exposure to the price of gold, but don’t have a pile of gold coins sitting under your desk.

When you consider gold ETFs for your portfolio, the nicest attraction is the advantages they

create for investors. Capital gains taxes are deferred until the sale of the ETF, giving the

funds a huge tax advantage over other investment products like mutual funds.

There is also the benefit of a simpler transaction and lower fees among the many other

advantages of ETFs. Not to say that there aren’t some limitations when trading ETFs, but if

you understand how they function, ETFs could be a boon to your investment strategy.

This study focus on how to evaluate gold fund investments. The study aims to help a gold

fund investor to evaluate gold funds investments in different ways.From the study it is

concluded that out of 10 gold funds investment investor can include QUANTUM GOLD, SBI

Gold, CANARA ROBECO in his portfolio.

http://etf.about.com/od/commodityetfs/a/Commodity_ETF.htm



http://etf.about.com/od/etfsymbols/g/GLD_ETFs.htm

http://etf.about.com/od/etfbasics/a/SPDR_ETF.htm

http://etf.about.com/od/etfglossary/g/Basket.htm

http://etf.about.com/od/etftaxes/a/ETF_Tax_Benefit.htm

http://etf.about.com/od/benefitsofetfs/tp/ETF_Mutual_Fund.htm

http://etf.about.com/od/benefitsofetfs/tp/Nine_ETF_Benefits.htm

http://etf.about.com/od/riskofetfs/tp/Five_ETF_Dsvntgs.htm

100

References

Jaspal, S. (2004). Growth, Performance and Prospects of Mutual Funds in India. Finance

India, 18(4), 1755-1760

Patrick Kuok-Kun Chu. (2011). Study on the tracking errors and their determinants: evidence

from Hong Kong exchange traded funds. Applied Financial Economics, 21(5), 309–315.

Madhumita Chakraborty, P., Jain, K., & Vinay, K. (2008). Mutual funds performance: An

evaluation of select growth funds in India. South Asian Journal of Management, 80(4), 80-92.

Sivakumar, K. P., Rajmohan, S., Sezhiyan, D. M., & Narasimhulu, S. (2010). Performance

Evaluation of Mutual Fund Industry in India. Vidwat:The Indian Journal of Management,

3(1), 26-32.

Gastineau, G. (2001). Exchange-Traded Funds: An Introduction. Journal of Portfolio

Management, 27, 88-96.

Kostovetsky, L. (2003). Index Mutual Funds and Exchange-Traded Funds. Journal of

Portfolio Management, 29, 80-92.

Website references

www.wikipedia.com

http://www.nseindia.com/products/content/equities/etfs/gold.htm

http://www.marketonmobile.com/Gold-Price-2013/March

http://www.indgold.com/index.shtml

http://www.wikipedia.com/

http://www.nseindia.com/products/content/equities/etfs/gold.htm

http://www.marketonmobile.com/Gold-Price-2013/March

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