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The efficiency of gold as a portfolio component over 1978 - 1995 is examined here from the perspective of seven major industrialized countries. Gold offers diversification benefits but dismal performance in terms of a risk-return trade-off. As a result, the inclusion of gold in test portfolios did not provide any increase in risk-adjusted return over the period as a whole. It was an attractive component of a diversified portfolio only for the subperiod 1978 - 1983 and never thereafter.
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Johnson et al. (1997) studied this question.
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