Do global risk perceptions influence world oil prices?
AbstractThis 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 InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 33 (2011)
Issue (Month): 3 (May)
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Web page: http://www.elsevier.com/locate/eneco
Metal prices Oil prices ARDL Generalized variance decompositions Generalized impulse responses Risk perception;
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