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Do global risk perceptions influence world oil prices?

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Author Info

  • Sari, Ramazan
  • Soytas, Ugur
  • Hacihasanoglu, Erk

Abstract

This paper investigates the information transmission mechanism between world oil, gold, silver, dollar/euro exchange rate markets, and volatility index (VIX) accommodating for global risk perceptions. We find that there is a unique long run equilibrium relationship, where gold, silver, exchange rate, and risk perceptions appear as long run forcing variables of world oil prices. We uncover that global risk perceptions have a significantly suppressing effect on oil prices in the long run. We also discover that global risk perceptions play a less important role in explaining the forecast error variance of oil prices in the short run, than prices in the alternative investment markets. Our results also suggest that a shock in risk perceptions of global investors have a negative but short lived initial impact on oil prices.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 3 (May)
Pages: 515-524

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:3:p:515-524

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Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Metal prices Oil prices ARDL Generalized variance decompositions Generalized impulse responses Risk perception;

References

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Citations

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Cited by:
  1. Wang, Yi-Hsien & Lee, Jun-De, 2012. "Estimating the import demand function for China," Economic Modelling, Elsevier, vol. 29(6), pages 2591-2596.
  2. Libo Yin & Liyan Han, 2013. "Exogenous Shocks and Information Transmission in Global Copper Futures Markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 33(8), pages 724-751, 08.
  3. Jozef Barunik & Evzen Kocenda & Lukas Vacha, 2014. "How does bad and good volatility spill over across petroleum markets?," Papers 1405.2445, arXiv.org.
  4. Takashi Miyazaki & Shigeyuki Hamori, 2013. "Testing for causality between the gold return and stock market performance: evidence for ‘gold investment in case of emergency’," Applied Financial Economics, Taylor & Francis Journals, vol. 23(1), pages 27-40, January.

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