Cointegration and Nonlinear Causality Amongst Gold, Oil, and the Indian Stock Market: Evidence from Implied Volatility Indices

Resources Policy, Forthcoming

17 Pages Posted: 20 Mar 2017  

Elie Bouri

Université Saint Esprit de Kaslik (USEK)

Anshul Jain

Management Development Institute

Pratap Chandra Biswal

Management Development Institute (MDI)

David Roubaud

Montpellier Business School

Date Written: January 19, 2017

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.

Keywords: Implied volatility, gold, crude oil, Indian stock market, cointegration, nonlinear causality

JEL Classification: C13, G15, Q40

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

Elie Bouri (Contact Author)

Université Saint Esprit de Kaslik (USEK) ( email )

KASLIK
Lebanon

Anshul Jain

Management Development Institute ( email )

Faculty Block, B3
P.O. Box 60, Sukhrali, Mehrauli Gurgaon Road
Gurgaon, Haryana 122001
India

Pratap Chandra Biswal

Management Development Institute (MDI) ( email )

Mehrauli Road
Sukhrali
Gurgaon, Haryana 122001
India

David Roubaud

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

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