Exchange Rate, Gold Price, and Stock Market Nexus: A Quantile Regression Approach

Abstract

In this study, we examine an empirical relationship between stock market volatility with the exchange rate and gold prices of an emerging market, “Pakistan”, employing daily and monthly data (PSX-100 Index) covering from 2001: Q3 to 2018: Q2. The study explains the average stock returns by applying MGARCH. Further, it investigates that the volatility in the exchange rate (Rs/US $) and gold prices remain equally strong in bearish and bullish conditions of the stock market by using a quantile regression approach (2001–2018). Additionally, the sample period is divided into two split samples that cover (2001–2007) and (2008–2018) respectively, based on global financial crises and applied similar analysis. The overall results show the negative impact of the exchange rate and gold price volatility on the stock market performance daily (monthly), supporting the argument that the stock market considers the exchange rate and gold price fluctuations as an adverse indicator and reacts negatively.

Oil and Gold Price Volatility on Indonesian Stock Market in the Period of Covid-19 Pandemic

“…There is no correlation between gold volatility and stock market returns. It is contrary to the research conducted by Raza et al (2016) and Ali et al (2020). They state that gold volatility brings negative impacts on stock market returns.…”

“…Gold volatility negatively affects all stock markets in developing countries for the long and short term. Research conducted by Ali et al (2020) states that the gold price volatility negatively impacts the stock market performance because the gold price volatility is considered an adverse indicator of the stock market.…”

Oil Price, Gold Price, Exchange Rate and Stock Market in Iraq Pre-During Covid19 Outbreak: An Ardl Approach

“…All these factors constitute a major obstacle to economic development and a major cause of crises and problems in the business environment in Iraq. The interaction between oil price, gold price, exchange rates, and stock markets have extensively been studied in the developed state but the same interference is less investigated in developing and emerging economies (Ali et al, 2020;Bouri et al, 2017). The limit study focused in Arab region markets (Mustafa, 2020, Marane, 2015, also researcher has been paid less attention to Middle East region which distinguished with fast economic growth compared to other emerging markets (Parsva and Lean, 2017).…”

“…The limit study focused in Arab region markets (Mustafa, 2020, Marane, 2015, also researcher has been paid less attention to Middle East region which distinguished with fast economic growth compared to other emerging markets (Parsva and Lean, 2017). Before COVID19 outbreak, several studies results found in one way or another that the stock market development affected by changing of oil price (Asaad et al, 2020a;Nguyen et al, 2020;Asaad, 2017;Echchabi and Azouzi, 2017;Hammoudeh and Li, 2015;Gokmenoglu and Fazlollahi, 2015;Creti et al, 2013;Berk and Aydogan, 2012;Eryigit, 2009;Bjornland, 2009), gold price (Abdul Kareem et al, 2020;Ali et al, 2020;Selvan and G2, 2020;Shabbir et al, 2020;Utama and Puryandani, 2020;Al-Ameer et al, 2018;Bhuyan and Dash, 2018;Kumar, 2017;Arouri et al, 2015;Gokmenoglu and Fazlollahi, 2015;Mulyadi and Anwar, 2010), and exchange rate (Ali et al, 2020;Mustafa, 2020;Utama and Puryandani, 2020;Parsva and Lean, 2017;Lee and Zhao, 2014), at the same time the study variables relationship recently inclusively and heavily becomes under the investigation in literature review after outbreak of COVID19 in the world since (2019) particularly the pandemic is still existing to the first half of (2021), and future researches are likely to predict different asset prices in light of COVID19 outbreak due to new studies have shown that COVID19 has influenced the entire financial and economic system (Devpura, 2021), while some studies results found in one way or another that the stock market development affected by fluctuation of oil price, gold price and exchange during COVID19 (Chien et al, 2021;Devpura, 2021;…”

Modeling Volatility Spillovers Between Stock Returns, Oil Prices, And Exchange Rates: Evidence from Russia and China

“…Ali et al (2020) employed an M GARCH model to study the relationship among Pakistan exchange rate, gold price, and stock market. Their empirical results indicated evidence of the negative effect of the exchange rate and gold price volatility on the Pakistan market Antonakakis, A et al (2020).…”