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

Date

2010-03-01

Author

Sarı, Ramazan
Soytaş, Uğur

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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.

Subject Keywords

Precious metal prices, Oil prices, ARDL, Generalized variance decompositions, Generalized impulse responses

URI

https://hdl.handle.net/11511/36543

Journal

ENERGY ECONOMICS

DOI

https://doi.org/10.1016/j.eneco.2009.08.010

Collections

Department of Business Administration, Article

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Citation Formats

R. Sarı and U. Soytaş, “Dynamics of oil price, precious metal prices, and exchange rate,” ENERGY ECONOMICS, pp. 351–362, 2010, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/36543.