Dynamics of oil price, precious metal prices, and exchange rate

By Ramazan Sari, Shawkat Hammoudeh, Ugur Soytas. 2010

519 citations recorded by the source corpus.

This study examines the co-movements and information transmission among the spot prices of four precious metals (gold, silver, platinum, and palladium), oil price, and the US dollar/euro exchange rate. We find evidence of a weak long-run equilibrium relationship but strong feedbacks in the short run. The spot precious metal markets respond significantly (but temporarily) to a shock in any of the prices of the other metal prices and the exchange rate. Furthermore, we discover some evidence of market overreactions in the palladium and platinum cases as well as in the exchange rate market. In conclusion, whether there are overreactions and re-adjustments or not, investors may diversify at least a portion of the risk away by investing in precious metals, oil, and the euro. Policy implications are provided.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/d736bf1344a81c0c294adb266ec8ff5eeb22c9a8

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In Economics and Econometrics

Citations in the corpus

The economic value of co-movement between oil price and exchange rate using copula-based GARCH models (2011, unknown): “Sari et al. (2009) employed generalized forecast error variance decompositions and generalized impulse response functions to find evidence of a weak long-run equilibrium relationship but with strong feedback in the short run.”
Forecasting oil price realized volatility using information channels from other asset classes (2017, unknown): “6 See, inter alia, Aloui and Jammazi (2009), Sari et al. (2010), Arouri et al. (2011), Aloui et al. (2013), Souček and Todorova (2013, 2014), Mensi et al. (2014), Antonakakis et al. (2014), Sadorsky (2014), Phan et al. (2015), IEA (2015), Ferraro et al. (2015).”