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Do global risk perceptions influence world oil prices?
Date
2011-05-01
Author
Sarı, Ramazan
Soytaş, Uğur
Hacıhasanoğlu, Erk
Metadata
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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
Journal
ENERGY ECONOMICS
DOI
https://doi.org/10.1016/j.eneco.2010.12.006
Collections
Department of Business Administration, Article