Essays on dynamic relationship between crude oil precious metals and stock markets

Abstract

The objective of this thesis is to investigate the dynamic conditional correlation between commodity markets (crude oil and precious metals) and stock markets in a transnational set-up. This thesis is segregated into three independent essays. First essay investigates the dynamic conditional correlation between crude oil and precious metals (gold, silver, platinum and palladium). Second essay examines the dynamic conditional correlation between precious metals (gold, silver, platinum and palladium) and stock indices of representative advanced (G7) and emerging economies (BRICS) over newlinedifferent time horizons. Third essay aims to scrutinize the time varying relationship newlinebetween crude oil and stock markets (G7 and BRICS). This thesis primarily employs newlineGARCH models to analyse the dynamic relationship between selected variables. newlineResults of this thesis can be summarised as follows. First essay indicates that, on an newlineaverage the dynamic conditional correlation between crude oil and precious metals newlineincrease during the periods characterised by unexpected events and events with newlineuncertain outcomes. Different precious metals respond differently to the changes in the newlineprices of crude oil. Markov switching approach (two regime model) shows that the newlinerelationship between crude oil and precious metals persist in both regime one and newlineregime two for different time durations. Moreover, the strength of the relationship newlinevaries with regimes, indicating the non-linear relationship between crude oil and newlineprecious metals. newlineFindings of the second essay indicate that the dynamic conditional correlation between newlineprecious metals and stock markets varies with timescales (short-run and long-run) both newlinein terms of dynamicity and strength of relationship. Developed (G7) and emerging newline(BRICS) markets exhibit different dynamic patterns over the study period. Both at newlinereturns level (without time scale decomposition) and higher timescales (16-128 weeks), the dynamic conditional correlation between stock markets and precious metals in the case of developed natio