Do global risk perceptions influence world oil prices?

Date

2011-05-01

Author

Sarı, Ramazan
Soytaş, Uğur
Hacıhasanoğlu, Erk

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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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.

Subject Keywords

Metal prices, Oil prices, ARDL, Generalized variance decompositions, Generalized impulse responses, Risk perception

URI

https://hdl.handle.net/11511/43061

Collections

Department of Business Administration, Article