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Cointegration and nonlinear causality amongst gold, oil, and the Indian stock market: Evidence from implied volatility indices

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  • Bouri, Elie
  • Jain, Anshul
  • Biswal, P.C.
  • Roubaud, David

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.

Suggested Citation

  • Bouri, Elie & Jain, Anshul & Biswal, P.C. & Roubaud, David, 2017. "Cointegration and nonlinear causality amongst gold, oil, and the Indian stock market: Evidence from implied volatility indices," Resources Policy, Elsevier, vol. 52(C), pages 201-206.
    • Handle: RePEc:eee:jrpoli:v:52:y:2017:i:c:p:201-206
    DOI: 10.1016/j.resourpol.2017.03.003
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    More about this item

    Keywords

    Implied volatility; Gold; Crude oil; Indian stock market; Cointegration; Nonlinear causality;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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