[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1510.07599.html
   My bibliography  Save this paper

An empirical analysis of the relationships between crude oil, gold and stock markets

Author

Listed:
  • Semei Coronado
  • Rebeca Jim'enez-Rodr'iguez
  • Omar Rojas
Abstract
This paper analyzes the direction of the causality between crude oil, gold and stock markets for the largest economy in the world with respect to such markets, the US. To do so, we apply non-linear Granger causality tests. We find a nonlinear causal relationship among the three markets considered, with the causality going in all directions, when the full sample and different subsamples are considered. However, we find a unidirectional nonlinear causal relationship between the crude oil and gold market (with the causality only going from oil price changes to gold price changes) when the subsample runs from the first date of any year between the mid-1990s and 2001 to last available data (February 5, 2015). The latter result may explain the lack of consensus existing in the literature about the direction of the causal link between the crude oil and gold markets.

Suggested Citation

  • Semei Coronado & Rebeca Jim'enez-Rodr'iguez & Omar Rojas, 2015. "An empirical analysis of the relationships between crude oil, gold and stock markets," Papers 1510.07599, arXiv.org, revised May 2016.
    • Handle: RePEc:arx:papers:1510.07599
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1510.07599
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Reboredo, Juan C., 2012. "Modelling oil price and exchange rate co-movements," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 419-440.
    2. Narayan, Paresh Kumar & Narayan, Seema & Zheng, Xinwei, 2010. "Gold and oil futures markets: Are markets efficient?," Applied Energy, Elsevier, vol. 87(10), pages 3299-3303, October.
    3. William A. Barnett & A. Ronald Gallant & Melvin J. Hinich & Jochen A. Jungeilges & Daniel T. Kaplan, 2004. "A Single-Blind Controlled Competition Among Tests for Nonlinearity and Chaos," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 581-615, Emerald Group Publishing Limited.
    4. Raj Aggarwal & Brian M. Lucey, 2007. "Psychological barriers in gold prices?," Review of Financial Economics, John Wiley & Sons, vol. 16(2), pages 217-230.
    5. Baur, Dirk G. & McDermott, Thomas K., 2010. "Is gold a safe haven? International evidence," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1886-1898, August.
    6. Abhay Abhyankar, Bing Xu, and Jiayue Wang, 2013. "Oil Price Shocks and the Stock Market: Evidence from Japan," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    7. Bell, David & Kay, Jim & Malley, Jim, 1996. "A non-parametric approach to non-linear causality testing," Economics Letters, Elsevier, vol. 51(1), pages 7-18, April.
    8. Baffes, John, 2007. "Oil spills on other commodities," Resources Policy, Elsevier, vol. 32(3), pages 126-134, September.
    9. Hilde C. Bjørnland, 2009. "Oil Price Shocks And Stock Market Booms In An Oil Exporting Country," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(2), pages 232-254, May.
    10. Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
    11. Ciner, Cetin, 2013. "Oil and stock returns: Frequency domain evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 1-11.
    12. Shiu-Sheng Chen, 2009. "Revisiting the Inflationary Effects of Oil Prices," The Energy Journal, , vol. 30(4), pages 141-154, October.
    13. Hooker, Mark A, 2002. "Are Oil Shocks Inflationary? Asymmetric and Nonlinear Specifications versus Changes in Regime," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 540-561, May.
    14. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
    15. Papapetrou, Evangelia, 2001. "Oil price shocks, stock market, economic activity and employment in Greece," Energy Economics, Elsevier, vol. 23(5), pages 511-532, September.
    16. Wang, Yu Shan & Chueh, Yen Ling, 2013. "Dynamic transmission effects between the interest rate, the US dollar, and gold and crude oil prices," Economic Modelling, Elsevier, vol. 30(C), pages 792-798.
    17. Roger D. Huang & Ronald W. Masulis & Hans R. Stoll, 1996. "Energy shocks and financial markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(1), pages 1-27, February.
    18. Ciner Cetin, 2001. "Energy Shocks and Financial Markets: Nonlinear Linkages," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 5(3), pages 1-11, October.
    19. Apergis, Nicholas & Miller, Stephen M., 2009. "Do structural oil-market shocks affect stock prices?," Energy Economics, Elsevier, vol. 31(4), pages 569-575, July.
    20. Lutz Kilian & Cheolbeom Park, 2009. "The Impact Of Oil Price Shocks On The U.S. Stock Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1267-1287, November.
    21. Ciner, Cetin & Gurdgiev, Constantin & Lucey, Brian M., 2013. "Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 202-211.
    22. Cavalcanti, Tiago & Jalles, João Tovar, 2013. "Macroeconomic effects of oil price shocks in Brazil and in the United States," Applied Energy, Elsevier, vol. 104(C), pages 475-486.
    23. Diks, Cees & Panchenko, Valentyn, 2006. "A new statistic and practical guidelines for nonparametric Granger causality testing," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1647-1669.
    24. Hiemstra, Craig & Jones, Jonathan D, 1994. "Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation," Journal of Finance, American Finance Association, vol. 49(5), pages 1639-1664, December.
    25. Zhang, Yue-Jun & Wei, Yi-Ming, 2010. "The crude oil market and the gold market: Evidence for cointegration, causality and price discovery," Resources Policy, Elsevier, vol. 35(3), pages 168-177, September.
    26. Álvarez, Luis J. & Hurtado, Samuel & Sánchez, Isabel & Thomas, Carlos, 2011. "The impact of oil price changes on Spanish and euro area consumer price inflation," Economic Modelling, Elsevier, vol. 28(1), pages 422-431.
    27. Sari, Ramazan & Hammoudeh, Shawkat & Soytas, Ugur, 2010. "Dynamics of oil price, precious metal prices, and exchange rate," Energy Economics, Elsevier, vol. 32(2), pages 351-362, March.
    28. Park, Jungwook & Ratti, Ronald A., 2008. "Oil price shocks and stock markets in the U.S. and 13 European countries," Energy Economics, Elsevier, vol. 30(5), pages 2587-2608, September.
    29. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    30. Su, Liangjun & White, Halbert, 2008. "A Nonparametric Hellinger Metric Test For Conditional Independence," Econometric Theory, Cambridge University Press, vol. 24(4), pages 829-864, August.
    31. Michael Melvin & Jahangir Sultan, 1990. "South African political unrest, oil prices, and the time varying risk premium in the gold futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 10(2), pages 103-111, April.
    32. Lutz Kilian, 2008. "Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy?," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 216-240, May.
    33. Bekiros, Stelios D. & Diks, Cees G.H., 2008. "The relationship between crude oil spot and futures prices: Cointegration, linear and nonlinear causality," Energy Economics, Elsevier, vol. 30(5), pages 2673-2685, September.
    34. Soytas, Ugur & Sari, Ramazan & Hammoudeh, Shawkat & Hacihasanoglu, Erk, 2009. "World oil prices, precious metal prices and macroeconomy in Turkey," Energy Policy, Elsevier, vol. 37(12), pages 5557-5566, December.
    35. Wang, Yudong & Wu, Chongfeng & Yang, Li, 2013. "Oil price shocks and stock market activities: Evidence from oil-importing and oil-exporting countries," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1220-1239.
    36. Sadorsky, Perry, 1999. "Oil price shocks and stock market activity," Energy Economics, Elsevier, vol. 21(5), pages 449-469, October.
    37. Jones, Charles M & Kaul, Gautam, 1996. "Oil and the Stock Markets," Journal of Finance, American Finance Association, vol. 51(2), pages 463-491, June.
    38. Bampinas Georgios & Panagiotidis Theodore, 2015. "On the relationship between oil and gold before and after financial crisis: linear, nonlinear and time-varying causality testing," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(5), pages 657-668, December.
    39. R. Cont, 2001. "Empirical properties of asset returns: stylized facts and statistical issues," Quantitative Finance, Taylor & Francis Journals, vol. 1(2), pages 223-236.
    40. Reboredo, Juan C., 2013. "Is gold a hedge or safe haven against oil price movements?," Resources Policy, Elsevier, vol. 38(2), pages 130-137.
    41. Juan Reboredo, 2010. "Nonlinear effects of oil shocks on stock returns: a Markov-switching approach," Applied Economics, Taylor & Francis Journals, vol. 42(29), pages 3735-3744.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Semei Coronado & Rangan Gupta & Saban Nazlioglu & Omar Rojas, 2023. "Time‐varying causality between bond and oil markets of the United States: Evidence from over one and half centuries of data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2239-2247, July.
    2. Manabu Asai & Rangan Gupta & Michael McAleer, 2019. "The Impact of Jumps and Leverage in Forecasting the Co-Volatility of Oil and Gold Futures," Energies, MDPI, vol. 12(17), pages 1-17, September.
    3. Bonato, Matteo & Gupta, Rangan & Lau, Chi Keung Marco & Wang, Shixuan, 2020. "Moments-based spillovers across gold and oil markets," Energy Economics, Elsevier, vol. 89(C).
    4. Camillo Lento & Nikola Gradojevic, 2021. "S&P 500 Index Price Spillovers around the COVID-19 Market Meltdown," JRFM, MDPI, vol. 14(7), pages 1-13, July.
    5. Umar, Zaghum & Nasreen, Samia & Solarin, Sakiru Adebola & Tiwari, Aviral Kumar, 2019. "Exploring the time and frequency domain connectedness of oil prices and metal prices," Resources Policy, Elsevier, vol. 64(C).
    6. Vesarach Aumeboonsuke, 2021. "Commodity Prices and the Stock Market in Thailand," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 34-40.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mohamed Albaity & Hasan Mustafa, 2018. "International and Macroeconomic Determinants of Oil Price: Evidence from Gulf Cooperation Council Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 8(1), pages 69-81.
    2. Shahbaz, Muhammad & Balcilar, Mehmet & Abidin Ozdemir, Zeynel, 2017. "Does oil predict gold? A nonparametric causality-in-quantiles approach," Resources Policy, Elsevier, vol. 52(C), pages 257-265.
    3. Wang, Xinya & Lucey, Brian & Huang, Shupei, 2022. "Can gold hedge against oil price movements: Evidence from GARCH-EVT wavelet modeling," Journal of Commodity Markets, Elsevier, vol. 27(C).
    4. İrfan Civcir & Uğur Akkoç, 2021. "Dynamic volatility linkages and hedging between commodities and sectoral stock returns in Turkey: Evidence from SVAR‐cDCC‐GARCH model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1978-1992, April.
    5. Smyth, Russell & Narayan, Paresh Kumar, 2018. "What do we know about oil prices and stock returns?," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 148-156.
    6. Awartani, Basel & Aktham, Maghyereh & Cherif, Guermat, 2016. "The connectedness between crude oil and financial markets: Evidence from implied volatility indices," Journal of Commodity Markets, Elsevier, vol. 4(1), pages 56-69.
    7. Lang, Korbinian & Auer, Benjamin R., 2020. "The economic and financial properties of crude oil: A review," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    8. Stavros Degiannakis & George Filis & Vipin Arora, 2018. "Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence," The Energy Journal, , vol. 39(5), pages 85-130, September.
    9. Akkoc, Ugur & Civcir, Irfan, 2019. "Dynamic linkages between strategic commodities and stock market in Turkey: Evidence from SVAR-DCC-GARCH model," Resources Policy, Elsevier, vol. 62(C), pages 231-239.
    10. repec:cii:cepiei:2012-q3-131-4 is not listed on IDEAS
    11. Tim Friedhoff & Cam-Duc Au & Philippe Krahnhof, 2023. "Analysis of the Impact of Orthogonalized Brent Oil Price Shocks on the Returns of Dependent Industries in Times of the Russian War," MUNI ECON Working Papers 2023-04, Masaryk University.
    12. Das, Debojyoti & Bhatia, Vaneet & Kumar, Surya Bhushan & Basu, Sankarshan, 2022. "Do precious metals hedge crude oil volatility jumps?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    13. Kumeka, Terver Theophilus & Uzoma-Nwosu, Damian Chidozie & David-Wayas, Maria Onyinye, 2022. "The effects of COVID-19 on the interrelationship among oil prices, stock prices and exchange rates in selected oil exporting economies," Resources Policy, Elsevier, vol. 77(C).
    14. Wang, Yudong & Wu, Chongfeng & Yang, Li, 2013. "Oil price shocks and stock market activities: Evidence from oil-importing and oil-exporting countries," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1220-1239.
    15. Kanjilal, Kakali & Ghosh, Sajal, 2017. "Dynamics of crude oil and gold price post 2008 global financial crisis – New evidence from threshold vector error-correction model," Resources Policy, Elsevier, vol. 52(C), pages 358-365.
    16. Boldanov, Rustam & Degiannakis, Stavros & Filis, George, 2016. "Time-varying correlation between oil and stock market volatilities: Evidence from oil-importing and oil-exporting countries," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 209-220.
    17. Angelidis, Timotheos & Degiannakis, Stavros & Filis, George, 2015. "US stock market regimes and oil price shocks," Global Finance Journal, Elsevier, vol. 28(C), pages 132-146.
    18. Rania Jammazi & Duc Khuong Nguyen, 2015. "Responses of international stock markets to oil price surges: a regime-switching perspective," Applied Economics, Taylor & Francis Journals, vol. 47(41), pages 4408-4422, September.
    19. Le, Thai-Ha & Chang, Youngho, 2016. "Dynamics between strategic commodities and financial variables: Evidence from Japan," Resources Policy, Elsevier, vol. 50(C), pages 1-9.
    20. Hanif, Waqas & Hadhri, Sinda & El Khoury, Rim, 2024. "Quantile spillovers and connectedness between oil shocks and stock markets of the largest oil producers and consumers," Journal of Commodity Markets, Elsevier, vol. 34(C).
    21. McMillan, David G. & Ziadat, Salem Adel & Herbst, Patrick, 2021. "The role of oil as a determinant of stock market interdependence: The case of the USA and GCC," Energy Economics, Elsevier, vol. 95(C).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1510.07599. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.