Volume 11 - Volume 11
An Analysis of Inter-Relationship among Commodities, Stock and Economic Indices
Abstract
This research will concentrate primarily on commodity relationships, mainly, prices of oil (OP) and
gold (GP), US stock market (S&P500), consumer confidence index (CCI), the US Dollar index
(USDX), and the industrial production (IP). The purpose of the analysis is to study the dynamic
interconnection between OP, USDX, CCI, GP, IP, and S&P500, by estimating the Vector Auto
Regression (VAR) model. OP, CCI, GP, USDX, S&P500, and IP are the different variables used in
this paper. Using monthly data from January 1971 to May 2020, this study applies the Granger
causality test, Variance Decomposition (VDC) analysis, and Impulse Response Function (IRF). It can
be inferred from the results that USDX has a significant relationship with GP and has a causal
impact on GP. Industrial Production has also shown a significant relationship with S&P500 and has
a causal impact on S&P500. The result also suggested that CCI and S&P500 share a unidirectional
relationship; the volatility in CCI in the short run is due to the S&P500. Also, the variables do not
have any other significant relationship. The findings also highlighted that USDX directly affected GP
negatively. Industrial production directly impacted S&P500 in the short run, while a positive
relationship is shared between CCI and S&P 500.
Paper Details
PaperID: 2550
Author's Name: Sahil Gupta and Madhvi Sethi
Volume: Volume 11
Issues: Volume 11
Keywords: Commodity, Economic Indices, Gold Price, Oil Price, Consumer Confidence Index, Industrial Production, S & P500, USDX, Vector Auto Regression, Granger Causality.
Year: 2021
Month: August
Pages: 5075-5087