Gold’s Hedging Abilities in the Swedish Stock Market : Does gold hedge against volatility in the Swedish stock market, and does its effectiveness vary across industry sectors?

Sammanfattning

This thesis examines whether gold functions as a hedge and/or safe-haven asset against volatility in the Swedish stock market between 2000 and 2025. The study focuses on the Swedish equity market represented by OMXSPI and selected industry sectors, including Financials, Industrials, Energy, Technology, Materials, and Consumer Staples. In addition to analysing the overall market relations, the study investigates whether gold’s hedging effectiveness differs across industries and market conditions. The increasing relevance of the topic is further underscored by gold repeatedly reaching record-high prices in recent years, which has renewed both investor and academic interest in gold’s financial role during periods of economic and geopolitical uncertainty. The analysis is based on quantitative methods and combines descriptive statistics, correlation analysis, Augmented Dickey-Fuller (ADF) unit root tests, Vector Autoregression (VAR), Granger causality tests, and Dynamic Conditional Correlation GARCH (DCC-GARCH) models. Gold prices are denominated in Swedish kronor (SEK) to isolate the relationship between gold and Swedish equities from exchange rate effects. The findings show that gold generally exhibits low or negative correlation with Swedish equities, supporting its role as a portfolio diversifier. The relationship becomes more negative during periods of financial stress, particularly during the 2008 financial crisis and subsequent market uncertainty, even displaying safe-haven characteristics. The portfolio simulations demonstrate that portfolios including gold achieve lower volatility and higher risk-adjusted return than portfolios consisting solely of Swedish equities. In particular, the Sharpe ratios consistently improve as the allocation to gold increases. The industry-level analysis reveals that gold’s hedging properties are not universal across sectors. The strongest negative relationships are observed with the Financials, Industrials and Technology sectors, while sectors such as Energy display weaker and more inconsistent hedging effects. The econometric analysis also indicates limited mean and volatility spillovers between gold and Swedish equities, implying that gold maintains a degree of independence even during periods of elevated market turbulence. Overall, the study concludes that gold acts as a valuable diversifier and conditional safehaven asset with the Swedish market, although its effectiveness varies across industries and market environments. Additionally, it provides evidence from a relatively underexplored market, such as Sweden, by incorporating both sector-level analysis and portfolio performance evaluation.