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Do global risk perceptions influence world oil prices?

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

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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