Resources Policy, Forthcoming
17 Pages Posted: 20 Mar 2017
Date Written: January 19, 2017
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.
Keywords: Implied volatility, gold, crude oil, Indian stock market, cointegration, nonlinear causality
JEL Classification: C13, G15, Q40
Suggested Citation: Suggested Citation
Bouri, Elie and Jain, Anshul and Biswal, Pratap Chandra and Roubaud, David, Cointegration and Nonlinear Causality Amongst Gold, Oil, and the Indian Stock Market: Evidence from Implied Volatility Indices (January 19, 2017). Resources Policy, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2937343