Cointegration and nonlinear causality amongst gold, oil, and the Indian stock market: Evidence from implied volatility indices. (June 2017)

• Record Type: Journal Article
• Authors: Bouri, Elie; Jain, Anshul; Biswal, P.C.; Roubaud, David
• Is Part Of: Resources policy. Volume 52(2017)
• Page Start: 201
• Page End: 206
• Publication Date: 2017-06
• Subjects: C13 -- G15 -- Q40; Implied volatility -- Gold -- Crude oil -- Indian stock market -- Cointegration -- Nonlinear causality; Mines and mineral resources -- Periodicals; Ressources minérales -- Périodiques; Ressources naturelles -- Gestion -- Périodiques; Environnement -- Politique gouvernementale -- Périodiques; 333.8
• DOI: 10.1016/j.resourpol.2017.03.003
• Languages: English
• ISSNs: 0301-4207

Abstract

Abstract: The emerging economy of India counts gold and oil amongst its top imports, suggesting that the prices of these resources affect the domestic inflation and stock market. Expectations on future volatility in these prices might lead to changes in the expected (implied) volatility of the Indian stock market. Unlike prior studies, we use implied volatility indices to examine the cointegration and nonlinear causality amongst international gold, crude oil, and the Indian stock market. Results indicate the presence of cointegration relationships and a nonlinear and positive impact of the implied volatilities of gold and oil on the implied volatility of the Indian stock market. Interestingly, there is evidence of an inverse bi-directional causality between the implied volatilities of gold and oil prices. Highlights: Interactions of the Indian stock market with oil and gold are examined using implied volatility indices. Volatilities of oil and gold have nonlinear impact on that of Indian stocks. Interestingly, there is an inverse bi-directional causality between the volatilities of gold and oil prices.