Modeling the relationships among gold price, oil price, foreign exchange, and the stock market index in Thailand

  • 64 Views
  • 11 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

This study examines the relationship among the price variables in the Thailand stock market, the foreign exchange market, the international gold market, and the crude oil market. Specifically, the study investigates whether (1) there exists a long-run equilibrium among oil price, gold price, foreign exchange, and the stock market index in Thailand, and (2) there is any dynamic effect of each asset market on other asset markets. All asset price series have shown both upward and downward trends over the study period. All monthly series in four markets from January 2000 to December 2018 are nonstationary and are integrated of order one. Then, the Johansen cointegration test is employed. The normalized cointegrating coefficients are negative. Such empirical result reveals that a significant long-run relationship exists among price variables in all asset markets, so that each asset class acts as a hedge against each other. The Granger causality test shows that the causations run from the stock price to the foreign exchange rate and the international gold price to the foreign exchange rate. Other short-run relationships have no significant causal links.

view full abstract hide full abstract
    • Figure 1. The SET index during 2000–2018
    • Figure 2. The Thai baht exchange rate (baht per US dollar) during 2000–2018
    • Figure 3. International gold price per ounce in US dollars during 2000–2018
    • Figure 4. International oil price per barrel in US dollars during 2000–2018
    • Table 1. Unit root tests
    • Table 2. Johansen cointegration test
    • Table 3. Maximum Eigen test
    • Table 4. Normalized cointegrating coefficients
    • Table 5. Error correction mechanism (ECM)
    • Table 6. VECM short-run Granger causality
    • Conceptualization
      Supachok Thakolsri
    • Data curation
      Supachok Thakolsri
    • Formal Analysis
      Supachok Thakolsri
    • Funding acquisition
      Supachok Thakolsri
    • Investigation
      Supachok Thakolsri
    • Methodology
      Supachok Thakolsri
    • Project administration
      Supachok Thakolsri
    • Resources
      Supachok Thakolsri
    • Software
      Supachok Thakolsri
    • Supervision
      Supachok Thakolsri
    • Validation
      Supachok Thakolsri
    • Visualization
      Supachok Thakolsri
    • Writing – original draft
      Supachok Thakolsri
    • Writing – review & editing
      Supachok Thakolsri