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5.2 ECONOMICS AND BUSINESS
This thesis examines the interlinkages between equity, currency, precious metals and oil markets. The study follows an international approach with a special focus on emerging markets in Europe, Asia and Latin America, but without forgetting the importance of the G-7 that represents the most developed markets. The present research also focuses on the existence of interlinkages between these markets and the currency, oil, and precious metals markets. The author of this thesis considered it appropriate to implement such an analysis due to the fact that the relationships between financial markets, currency markets and the above-mentioned commodities markets have not been analyzed to the extent that it is proposed in the present thesis. Using daily data, the study focuses on the investigation of the relationships that exist between these financial and commodity markets for a time period that spans from 1995 to 2008; different time periods and sub-samples are also analysed, in order to obtain an in-depth understanding of the interlinkages between these markets. Both the long-run and the short-run association between these variables are investigated. In doing this, techniques like the Engle and Granger two step, and Johansen cointegration techniques, Vector Error Correction Modelling and Granger causality tests are employed with the main objective of examining the relationship between these financial variables. The study also employs bivariate and trivariate econometric techniques in order to provide sufficient evidence regarding the interlinkages between these markets. As a consequence, the existing evidence is updated and extended by investigating the nature of volatility spillovers between these markets; thus, the sample period is divided into a number of sub periods to analyse the behaviour of these variables before and after the introduction of the Euro, and also before and after the Asian Crisis using GARCH and EGARCH modelling. The main findings show that exchange rates and stock prices seem to be independent. Overall, there is no evidence of these two variables moving together either in the long-run or short-run. The results show evidence of a unidirectional causality relationship running from stock returns to exchange rates in some of the countries under analysis, with weak evidence of a causal relationship running from exchange rates to stock returns. In relation to the volatility analysis, there is some commonality regarding the behaviour of the variables, with a unidirectional spillover effect between the markets, which is found from the stock returns equation to the exchange rates equation. The lack of significant spillovers from exchange rate changes to stock returns found here for some countries across a number of exchange rates is consistent with existing research in this area. The analysis of precious metals markets shows that they do not seem to be strongly affected by movements in equity markets; on the other hand, oil prices tend to be positively correlated with precious metals markets, the latter having an important influence on them.
Morales, L.: Interlinkages Between Equity, Currency, Precious Metals and Oil Markets: and Emphasis on Emerging Markets: Doctoral Thesis. University of Limerick, 2009.