Oil, gold, US dollar and stock market interdependencies: a global analytical insight

• Published in: European journal of management and business economics 2017-01, Vol.26 (3), p.278-293
• Main Authors: Arfaoui, Mongi, Rejeb, Aymen Ben
• Format: Article
• Language: English
• Subjects: American dollar; Commodities; Commodity markets; Consumer Price Index; Crude oil prices; Default; Exports; Foreign exchange; Foreign exchange rates; Global economy; Global perspective; Gold; Gold price; Imports; Indirect effects; International finance; International trade; Motivation; Oil price; Petroleum; Policy making; Portfolio investments; Prices; Securities markets; Simultaneous equations; Stock exchanges; Stock market; Trade-weighted exchange rate
• ISSN: 2444-8451; 2444-8494
• DOI: 10.1108/EJMBE-10-2017-016

The purpose of this paper is to examine, in a global perspective, the oil, gold, US dollar and stock prices interdependencies and to identify instantaneously direct and indirect linkages among them. A methodology based on simultaneous equations system was used to identify direct and indirect linkages for the period 1995-2015. The authors try initially to find theoretical answers to main question of the study by discussing causal bilateral relationships while focusing on multilateral interactions. The results show significant interactions between all markets. The authors found a negative relation between oil and stock prices but oil price is significantly and positively affected by gold and USD. Oil price is also affected by oil futures prices and by Chinese oil gross imports. Gold rate is concerned by changes in oil, USD and stock markets. The US dollar is negatively affected by stock market and significantly by oil and gold price. Indirect effects always exist which confirm the presence of global interdependencies and involve the financialization process of commodity markets. Motivation of this research paper is the substantial implications of price movements on real economy and financial markets. Understanding that co-movement has great value for investors, policy makers and portfolio managers. This paper differs from previous studies in several aspects. First, most of the research papers focus on bilateral linkages solely, while the authors' investigation was implemented on all the four markets simultaneously. Second, the study was developed in a global framework using international data. The global analysis allows avoiding country specific effects.