The Role of Gold in Diversifying Stock and Cryptocurrency Portfolios: An Analytical Comparative Study Between Gold, Cryptocurrency, and Stock Portfolios Listed on the Iraq Stock Exchange for the Period (2017-2023)

Abstract

Gold is a rare, limited, and highly liquid asset. However, it is a luxury commodity and therefore can be considered an investment opportunity. It is readily available and does not carry significant risks to its users. Furthermore, there are no associated credit risks. Given these characteristics, it is a highly significant asset and plays a fundamental role in investment portfolios. These characteristics increase investors' interest in including gold in their portfolios, especially during times of financial crises. If an investor decides to include gold in their investment portfolio, it is essential to evaluate the proportion of gold in the portfolio, taking into account risk, return, and diversification. This study attempts to test and prove the hypothesis: Does gold provide good diversification for an investment portfolio? Is gold an important asset in an investment portfolio? Do investment portfolios that include precious metals such as gold show a better performance rate than portfolios that do not contain them? In addition, the research focuses on building an optimal investment portfolio of stocks, an investment portfolio of gold and stocks, an investment portfolio of stocks and cryptocurrencies, an investment portfolio of cryptocurrencies and gold, and an investment portfolio of stocks, cryptocurrencies, and gold. The current research is the first Iraqi, Arab, and international research that includes gold in portfolios of stocks, currencies, and cryptocurrencies simultaneously. The research sample consisted of (21 stocks) listed on the Iraq Stock Exchange, and (21) global cryptocurrencies for the period from (January 2017 - September 2023). The research concluded that including gold in stock portfolios clearly improves their performance.