On the Co-movement of Crude, Gold Prices and Stock Index in Indian Market

Abhibasu Sen; Karabi Dutta Chaudhury

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arXiv · 1904.05317

On the Co-movement of Crude, Gold Prices and Stock Index in Indian Market

Abhibasu Sen·Karabi Dutta Chaudhury

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Abstract

This non-linear relationship in the joint time-frequency domain has been studied for the Indian National Stock Exchange (NSE) with the international Gold price and WTI Crude Price being converted from Dollar to Indian National Rupee based on that week's closing exchange rate. Though a good correlation was obtained during some period, but as a whole no such cointegration relation can be found out. Using the \textit{Discrete Wavelet Analysis}, the data was decomposed and the presence of Granger Causal relations was tested. Unfortunately no significant relationships are being found. We then studied the \textit{Wavelet Coherence} of the two pairs viz. NSE-Nifty \& Gold and NSE-Nifty \& Crude. For different frequencies, the coherence between the pairs have been studied. At lower frequencies, some relatively good coherence have been found. In this paper, we report for the first time the co-movements between Crude Oil, Gold and Indian Stock Market Index using Wavelet Analysis (both Discrete and Continuous), a technique which is most sophisticated and recent in market analysis. Thus for long term traders they can include gold and/or crude in their portfolio along with NSE-Nifty index in order to decrease the risk(volatility) of the portfolio for Indian Market. But for short term traders, it will not be effective, not to include all the three in their portfolio.

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BibTeX RIS

Abhibasu Sen, Karabi Dutta Chaudhury. 2019-04-09. On the Co-movement of Crude, Gold Prices and Stock Index in Indian Market. https://arxiv.org/abs/1904.05317

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