Exchange rates, oil prices and world stock returns

Authors

Andre V. Mollick, The University of Texas Rio Grande ValleyFollow
Hamid Sakaki

Document Type

Article

Publication Date

6-2019

Abstract

This paper examines responses of 14 major currency/USD pairs to two global factors (oil and world equity returns) from January 1999 to July 2017, a period comprising the global financial crisis and oil price boom and collapse. With global equity markets advancing, risk tolerance increases and oil and stock markets impact currencies under two methodologies: transmission of shocks and mean-variance approaches. Vector autoregressions (VARs) suggest large and statistically significant responses: commodity currencies strongly appreciate following positive oil price shocks and depreciate with positive global equity shocks. GARCH models provide similar qualitative results with coefficients typically larger for global equity returns than for oil returns. Emerging market currencies and subsamples for the crisis period are also discussed.

Comments

Published by Elsevier Ltd. Original published version available at https://doi.org/10.1016/j.resourpol.2018.07.007

Recommended Citation

Mollick, André Varella, and Hamid Sakaki. “Exchange Rates, Oil Prices and World Stock Returns.” Resources Policy 61 (June 1, 2019): 585–602. https://doi.org/10.1016/j.resourpol.2018.07.007.

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

First Page

585

Last Page

602

Publication Title

Resources Policy

DOI

10.1016/j.resourpol.2018.07.007