The Impact of the Interaction of Financial Investment Instruments on Financial Market

Abstract

Since there are many factors influencing financial markets, investors and finance professionals need a broad perspective and careful monitoring of market trends. This study aims to examine the causality relationships among gold, oil, exchange rate, interest rate, and the volatility index known as the Fear Index (VIX). For this purpose, data from January 2012 to January 2022 were analyzed for gold prices, US crude oil (WTI) prices, EUR/USD parity, 10-year US Treasury bond interest rates, and VIX index variables. A logarithmic transformation was applied to the data. Unit root tests and Granger causality tests were performed in the study. According to the results, it was observed that oil prices cause gold prices. Additionally, it was concluded that gold prices, oil prices, and volatility are the causes of the exchange rate. This study makes a significant contribution to understanding the interaction among financial investment instruments and their potential effects on financial markets.

Keywords

• Gold
• Oil
• Exchange Rate
• 10-year US Treasury Bond Interest Rate
• VIX Volatility Index

Ethical Statement

During the writing process of the study titled “The Impact of the Interaction of Financial Investment Instruments on Financial Markets,” scientific rules, ethical guidelines, and citation standards have been adhered to. No manipulation has been made on the collected data, and this study has not been submitted for evaluation to any other academic publication. The study does not require ethical approval.

Finansal Yatırım Araçlarının Etkileşiminin Finansal Piyasalara Etkisi

Abstract

Finansal piyasalara etki eden birçok faktör olduğundan, yatırımcılar ve finans profesyonelleri geniş bir bakış açısına ve piyasa trendlerini dikkatlice takip etmeye ihtiyaç duymaktadırlar. Bu çalışmanın amacı, altın, petrol, döviz kuru, faiz ve korku endeksi olarak anılan volatilite endeksi (VIX) arasındaki nedensellik ilişkilerinin incelenmesidir. Bu amaçla çalışmada, altın fiyatları, Amerikan ham petrol (WTI) fiyatları, EUR/USD paritesi, Amerikan hazine 10 yıllık gösterge tahvil faiz oranları ve VIX endeksi değişkenlerine ait Ocak 2012-Ocak 2022 dönemi verileri analiz edilmiştir. Verilere logaritmik dönüşüm uygulanmıştır. Çalışmada birim kök testleri ve nedensellik testi yapılmıştır. Analiz sonuçlarına göre petrol fiyatlarının altın fiyatlarının nedeni olduğu görülmüştür. Ayrıca, altın fiyatlarının, petrol fiyatlarının ve volatilitenin; döviz kurunun nedeni olduğu sonucuna ulaşılmıştır. Bu çalışma, finansal yatırım araçları arasındaki etkileşimin ve bu etkileşimin finansal piyasalara olan muhtemel etkilerinin anlaşılmasına yönelik önemli bir katkı sağlamaktadır.

Keywords

• Altın
• Petrol
• Döviz Kuru
• 10 Yıllık ABD Hazine Bonosu Faiz Oranı
• VIX Volatilite Endeksi

Ethical Statement

During the writing process of the study titled “The Impact of the Interaction of Financial Investment Instruments on Financial Markets,” scientific rules, ethical guidelines, and citation standards have been adhered to. No manipulation has been made on the collected data, and this study has not been submitted for evaluation to any other academic publication. The study does not require ethical approval.

References

1. Gokmenoglu, K. K., & Fazlollahi, N. (2015). The interactions among gold, oil, and stock market: Evidence from S&P500. Procedia Economics and Finance, 25, 478-488. https://doi.org/10.1016/S2212-5671(15)00760-1.
2. Güneş, H. (2022, May). VIX, Dolar endeksi ve ABD 10 yıllık devlet tahvili faizi arasındaki nedensellik ilişkisi. In 4 th International Congress on Multidisciplinary Social Sciences (p. 174).
3. Hameed, Z., Shafi, K., & Nadeem, A. (2021). Volatility spillover effect between oil prices and foreign exchange markets. Energy Strategy Reviews, 38, 100712. https://doi.org/10.1016/j.esr.2021.100712.
4. Hanif, M. (2020). Relationship between oil and stock markets: Evidence from Pakistan stock exchange. International Journal of Energy Economics and Policy, 10(5). https://ssrn.com/abstract=3761996
5. Ji, Q., & Fan, Y. (2016). Modelling the joint dynamics of oil prices and investor fear gauge. Research in International Business and Finance, 37, 242-251. https://doi.org/10.1016/j.ribaf.2015.11.016.
6. Kang, S., Hernandez, J. A., Sadorsky, P., & McIver, R. (2021). Frequency spillovers, connectedness, and the hedging effectiveness of oil and gold for US sector ETFs. Energy Economics, 99, 105278. doi:10.1016/j.eneco.2021.105278.
7. Kılıç, E. ve Özyürek, H. (2022). VIX (Korku) Endeksi ile Vadeli İşlem Piyasaları Arasındaki Nedensellik İlişkisinin Analizi. Hacettepe Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi , 40 (4), 762-775. https://doi.org/10.17065/huniibf.1058943.
8. Kim, J. M., & Jung, H. (2018). Dependence Structure between Oil Prices, Exchange Rates, andInterest Rates. The Energy Journal, 39(2), 256- 280. doi: 10.5547/01956574.39.2.jkim.

9. Kocaarslan, B., & Soytas, U. (2024). How do the reserve currency and uncertainties in major markets affect the uncertainty of oil prices over time?. International Journal of Finance & Economics. https://doi.org/10.1002/ijfe.2962
10. Kumar, S. (2017). On the nonlinear relation between crude oil and gold. Resources Policy, 51, 219-224. https://doi.org/10.1016/j.resourpol.2017.01.003.
11. Li, Y., & Du, Q. (2024). Oil price volatility and gold prices volatility asymmetric links with natural resources via financial market fluctuations: Implications for green recovery. Resources Policy, 88, 104279. https://doi.org/10.1016/j.resourpol.2023.104279.
12. Li, Y., & Du, Q. (2024). Oil price volatility and gold prices volatility asymmetric links with natural resources via financial market fluctuations: Implications for green recovery. Resources Policy, 88, 104279. https://doi.org/10.1016/j.resourpol.2023.104279.
13. Liu, Z., Ding, Z., Li, R., Jiang, X., Wu, J., & Lv, T. (2017). Research on differences of spillover effects between international crude oil price and stock markets in China and America. Natural Hazards, 88, 575- 590. doi: 10.1007/s11069-017-2881-8.
14. Mashayekhi, B., Ara, M. S., & Jafari, A. (2013). Gold price and exchange rate volatility: Effects of economic sanctions. International Journal of Information Technology and Management, 4(1), 121-127.
15. Mishra, A. K., Ghate, K., Renganathan, J., Kennet, J. J., & Rajderkar, N. P. (2022). Rolling, recursive evolving and asymmetric causality between crude oil and gold prices: evidence from an emerging market. Resources Policy, 75, 102474. https://doi.org/10.1016/j.resourpol.2021.102474.
16. Mishra, P. K., Das, J. R., & Mishra, S. K. (2010). Gold price volatility and stock market returns in India. American Journal of Scientific Research, 9(9), 47-55. http://www.eurojournals.com/ajsr.htm.
17. Partalidou, X., Kiohos, A., Giannarakis, G., & Sariannidis, N. (2016). The impact of Gold, Bond, Currency, Metals and Oil markets on the USA stock market. International Journal of Energy Economics and Policy, 6(1), 76-81.
18. Pata, U. K., Usman, O., Olasehinde-Williams, G., & Ozkan, O. (2023). Stock returns, crude oil and gold prices in Turkey: evidence from rolling window-based nonparametric quantile causality test. Asia-Pacific Financial Markets, 1-19. https://doi.org/10.1007/s10690-023-09430-x.
19. Šimáková, J. (2011). Analysis of the relationship between oil and gold prices. Journal of finance, 51(1), 651-662. https://www.researchgate.net/publication/266005958.
20. Sjaastad, L. A. (2008). The price of gold and the exchange rates: Once again. Resources Policy, 33(2), 118-124. Doi: 10.1016/j.resourpol.2007.10.002.
21. Tanin, T. I., Sarker, A., & Brooks, R. (2021). Do currency exchange rates impact gold prices? New evidence from the ongoing COVID-19 period. International Review of Financial Analysis, 77, 101868. https://doi.org/10.1016/j.irfa.2021.101868.
22. Walid, C., Chaker, A., Masood, O., & Fry, J. (2011). Stock market volatility and exchange rates in emerging countries: A Markov-state switching approach. Emerging Markets Review, 12(3), 272-292. doi: 10.1016/j.ememar.2011.04.003.
23. Wang, Y. S., & Chueh, Y. L. (2013). Dynamic transmission effects between the interest rate, the US dollar, and gold and crude oil prices. Economic Modelling, 30, 792-798. doi: 10.1016/j.econmod.2012.09.052.
24. Whaley, R. E. (2000). The investor fear gauge. Journal of portfolio management, 26(3), 12-17. doi: 10.3905/jpm.2000.319728.
25. Zhang, J., & He, Q. Z. (2021). Dynamic Cross‐Market Volatility Spillover Based on MSV Model: Evidence from Bitcoin, Gold, Crude Oil, and Stock Markets. Complexity, 2021(1), 9912418. https://doi.org/10.1155/2021/9912418.
26. Zhang, Y. J., & Wei, Y. M. (2010). The crude oil market and the gold market: Evidence for cointegration, causality and price discovery. Resources Policy, 35(3), 168-177. doi.org/10.1016/j.resourpol.2010.05.003.