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Do global risk perceptions influence world oil prices?

Ramazan Sarı (), Ugur Soytas () and Erk Hacihasanoglu

Energy Economics, 2011, vol. 33, issue 3, 515-524

Abstract: This paper investigates the information transmission mechanism between world oil, gold, silver, dollar/euro exchange rate markets, and volatility index (VIX) accommodating for global risk perceptions. We find that there is a unique long run equilibrium relationship, where gold, silver, exchange rate, and risk perceptions appear as long run forcing variables of world oil prices. We uncover that global risk perceptions have a significantly suppressing effect on oil prices in the long run. We also discover that global risk perceptions play a less important role in explaining the forecast error variance of oil prices in the short run, than prices in the alternative investment markets. Our results also suggest that a shock in risk perceptions of global investors have a negative but short lived initial impact on oil prices.

Keywords: Metal; prices; Oil; prices; ARDL; Generalized; variance; decompositions; Generalized; impulse; responses; Risk; perception (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:33:y:2011:i:3:p:515-524

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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