The dynamic relationship of gold price, oil price, exchange rate and Philippine stock market returns

• Main Authors: Gan, Sanmae U., Ngo, Jan Louie T., Say, Solomon P., Tan, Ron Erich O.
• Format: text
• Language: English
• Published: Animo Repository 2014
• Subjects: Foreign exchange rates > Philippines; Gold; Petroleum products > Prices > Philippines; Stock exchanges > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/7762
• Institution: De La Salle University

The rise of globalization and the idea that different assets and economics are becoming more interconneced has led to the question as to how different asset classes such as gold, crude oil, exchange rates, and stock market returns affect each other throughout time. By being able to ascertain how these asset classes affect each other, portfolio maximization can be achieved for investors and government policies can be made to prevent drastic overall collapses. This study uses the vector autoagression model to analyze these relationships and bring light to the degree of impact that these asset classes have on each other. Using data from the Philippines for years 1993 to 2013, assessing the monthly perspective, gold has the most significant impact on the asset classes. This proves that gold has the most intrinsic value in the longer period with Brent and the exchange rate following behind. Meanwhile the stock market returns had no effect on the others. Contrary to this, assessing daily observation, it was found out that oil prices had the largest impact towards the asset classes, followed by gold and the exchange rate, while the stock market returns were seen as to have no effect on the others as well. Despite the impacts that these different asset classes have on one another, the price fluctuations present from these relationships eventually plateaus over a short period of time. This proves that these financial markets are stable in the long run.