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Effects of Crude Oil and Gold Prices on US Stock Market: Evidence for USA from ARDL Bounds Testing

AKM Matiur Rahman, Muhammad Mustafa

Abstract


This paper explores the effects of changes in crude oil and gold prices on US Stock market movement. Daily data are used from the first business day of January, 1986 through December30, 2016. Efficient unit root tests (DF-GLS and Ng-Perron) are applied to examine the time series property of the variables in terms of stationarity or non-stationarity.  ARDL Bounds Testing is applied for co-integration. Both DF-GLS and Ng-Perron tests confirm non-stationarity of each variable and depict I (1) behavior of all the variables in log-levels, included in this study. The ARDL-Bounds testing confirm co-integration among the variables. There is evidence of long-run convergence among all these variables with very tepid adjustment toward the equilibrium. Short-run negative effects of changes in gold and crude oil prices on US stock market returns are observed. The effect is statistically significant from gold price changes, but insignificant from crude oil price changes.


Keywords


Gold Price; Crude oil Price; Stock Market Return; ARDL; VECM; Causality; Feedback; Long-Run; Short-Run

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DOI: http://dx.doi.org/10.18686/fm.v3i1.1055

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