Do global risk perceptions influence world oil prices?


SARI R. , SOYTAŞ U. , HACIHASANOĞLU E.

ENERGY ECONOMICS, vol.33, no.3, pp.515-524, 2011 (Journal Indexed in SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 33 Issue: 3
  • Publication Date: 2011
  • Doi Number: 10.1016/j.eneco.2010.12.006
  • Title of Journal : ENERGY ECONOMICS
  • Page Numbers: pp.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. (c) 2010 Elsevier B.V. All rights reserved.