The impact of oil and gold price fluctuations on the South African equity market: Volatility spillovers and financial policy implications

Morema, Kgotso; Bonga‐Bonga, Lumengo

doi:10.1016/j.resourpol.2020.101740

Cited by 71 publications

(35 citation statements)

References 32 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The other two global variables, FFR and gold price, have no statistically significant impact on FTSE JSE of Johannesburg. The insignificant impact of gold is not consistent with previous studies which found that both oil and gold have significant impact on stock markets in South Africa (see for exampleMorema and Bonga-Bonga 2018).South Africa is now no longer the largest producer of gold, and any negative consequence of higher gold prices may be outweighed by cheaper oil imports 6 . The insignificant impact of FFR on FTSE JSE is not in consonance with previous literature (see for exampleBowman et al 2015) and this can be explained by low net external liability, stable FDI inflows, Rand dominated private and public sector debt, relatively small and liquid financial market and adequate forex reserve (BIS Paper 2014).Finally we find that BVSP Sao Paulo exhibits a positive response to shocks in gold price.…”

mentioning

confidence: 57%

US monetary policy, oil and gold prices: Which has a greater impact on BRICS stock markets?

Ansari

Sensarma

2019

Economic Analysis and Policy

View full text Add to dashboard Cite

This paper examines the effect of US monetary policy, oil price and gold price on stock indices of BRICS countries. Vector Auto Regression model is applied to study the stock indices of all BRICS countries as a group over the period 1996-2018. We find that the Bombay Sensex responds positively to the Federal Funds Rate. The stock index of South Africa-FTSE JSE of Johannesburg-responds negatively to shocks in oil price while stock indices of Russia andBrazil-RTSI of Moscow and BVSP of Sao Paulo respectively-respond positively to gold price changes. We provide managerial and policy implications of these results. JEL ClassificationE52; E44; G10

show abstract

mentioning

confidence: 57%

US monetary policy, oil and gold prices: Which has a greater impact on BRICS stock markets?

Ansari

Sensarma

2019

Economic Analysis and Policy

View full text Add to dashboard Cite

show abstract

“…Yet, Samanta and Zadeh (2012) found oil and gold have an asymmetric relationship. Morema and Bonga-Bonga (2018) showed returns in the industrial sector are more affected by oil prices. Based on these findings, the following hypotheses suggested: H1: The spillover effect of return and volatility of oil and stock price is met H2: The spillover effect of return and volatility of gold and exchange rate is met H3: The spillover effect of return and volatility of oil and gold is met Drachal (2018) found that oil price has a negative impact on exchange rates.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Also, understanding return and volatility transmission mechanisms among those instruments in the financial markets was is necessary for both researchers and investors. The GARCH method was used previously to find volatility spillover between crucial stock markets (e.g., financial and oil markets (Cevik et al, 2020;Contuk et al, 2013;Gokmenoglu & Fazlollahi, 2015;Morema & Bonga-Bonga, 2018). The interdependence of oil, gold, the USD, and stocks are identified by Samanta and Zadeh (2012).…”

Section: Introductionmentioning

confidence: 99%

Revisiting spillover effect: An empirical evidence from GARCH-ARMA approach

Huruta¹,

Hans²,

Forestal³

et al. 2021

Industrija

View full text Add to dashboard Cite

This study analyzes the spillover effect of markets' commodity, exchange rate, and stock price. Starting from July 1, 2009, the daily data to December 31, 2019, are conducted in our study. The GARCH-ARMA approach has been undertaken in this study. The results show that four pairs experience the unidirectional (positive) spillover effect of return. Yet, the spillover effect of volatility shows a two-way relationship (both positive and negative) between commodity markets, stock prices, and exchange rates. To conclude, both stock prices and gold are volatility's net transmitters to other markets, while the EURUSD market is some markets' net receiver of volatility.

show abstract

“…For instance, a study by Morema and Bonga-Bonga (2020) used a vector autoregression asymmetric and dynamic conditional correlation generalised autoregressive conditional heteroskedasticity (VAR-ADCC-GARCH) method to assess volatility spillovers and hedge effectiveness between gold, oil, and stock markets. They find significant volatility spillover between the gold and stock markets, oil and stock markets.…”

Section: Introductionmentioning

confidence: 99%

Assessing Market Risk in BRICS and Oil Markets: An Application of Markov Switching and Vine Copula

Mwamba¹,

Mwambi²

2021

IJFS

View full text Add to dashboard Cite

This paper investigates the dynamic tail dependence risk between BRICS economies and the world energy market, in the context of the COVID-19 financial crisis of 2020, in order to determine optimal investment decisions based on risk metrics. For this purpose, we employ a combination of novel statistical techniques, including Vector Autoregressive (VAR), Markov-switching GJR-GARCH, and vine copula methods. Using a data set consisting of daily stock and world crude oil prices, we find evidence of a structure break in the volatility process, consisting of high and low persistence volatility processes, with a high persistence in the probabilities of transition between lower and higher volatility regimes, as well as the presence of leverage effects. Furthermore, our results based on the C-vine copula confirm the existence of two types of tail dependence: symmetric tail dependence between South Africa and China, South Africa and Russia, and South Africa and India, and asymmetric lower tail dependence between South Africa and Brazil, and South Africa and crude oil. For the purpose of diversification in these markets, we formulate an asset allocation problem using raw returns, MS GARCH returns, and C-vine and R-vine copula-based returns, and optimize it using a Particle Swarm optimization algorithm with a rebalancing strategy. The results demonstrate an inverse relationship between the risk contribution and asset allocation of South Africa and the crude oil market, supporting the existence of a lower tail dependence between them. This suggests that, when South African stocks are in distress, investors tend to shift their holdings in the oil market. Similar results are found between Russia and crude oil, as well as Brazil and crude oil. In the symmetric tail, South African asset allocation is found to have a well-diversified relationship with that of China, Russia, and India, suggesting that these three markets might be good investment destinations when things are not good in South Africa, and vice versa.

show abstract

The impact of oil and gold price fluctuations on the South African equity market: Volatility spillovers and financial policy implications

Cited by 71 publications

References 32 publications

US monetary policy, oil and gold prices: Which has a greater impact on BRICS stock markets?

US monetary policy, oil and gold prices: Which has a greater impact on BRICS stock markets?

Revisiting spillover effect: An empirical evidence from GARCH-ARMA approach

Assessing Market Risk in BRICS and Oil Markets: An Application of Markov Switching and Vine Copula

Contact Info

Product

Resources

About