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Long Run Relationships between Base Metals, Gold and Oil

Duan, Wenjia LU and Yusupov, Garib (2010) NEKM07 20101
Department of Economics
Abstract
This paper investigates the possible presence of long-run relationships (cointegration) among base metals and between base metals, Crude oil and Gold, using the Johansen multivariate approach and VEC Engle-Granger causality tests. The commodities used are seven base metals: Aluminum, Aluminum Alloy, Copper, Nickel, Zink, and Tin (from the London Metal Exchange), Crude oil and Gold. The Johansen approach results indicate that Aluminum, Copper, Gold and Nickel share long-run relationships with each other. VEC Granger Causality test at 10% significance level shows that all nine variables are cointegrated with at least one of the remaining variables in the group which indicate the diversification possibilities are limited. As for the price... (More)
This paper investigates the possible presence of long-run relationships (cointegration) among base metals and between base metals, Crude oil and Gold, using the Johansen multivariate approach and VEC Engle-Granger causality tests. The commodities used are seven base metals: Aluminum, Aluminum Alloy, Copper, Nickel, Zink, and Tin (from the London Metal Exchange), Crude oil and Gold. The Johansen approach results indicate that Aluminum, Copper, Gold and Nickel share long-run relationships with each other. VEC Granger Causality test at 10% significance level shows that all nine variables are cointegrated with at least one of the remaining variables in the group which indicate the diversification possibilities are limited. As for the price discovery, price development of Aluminum and especially Copper should be given more attention, since they Granger-cause several of the other variables. (Less)
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author
Duan, Wenjia LU and Yusupov, Garib
supervisor
organization
course
NEKM07 20101
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Commodities, Weak Exogeneity, VEC Granger Causality, Johansen Cointegration Test
language
English
id
1624477
date added to LUP
2010-06-29 11:56:28
date last changed
2010-06-29 11:56:28
@misc{1624477,
  abstract     = {This paper investigates the possible presence of long-run relationships (cointegration) among base metals and between base metals, Crude oil and Gold, using the Johansen multivariate approach and VEC Engle-Granger causality tests. The commodities used are seven base metals: Aluminum, Aluminum Alloy, Copper, Nickel, Zink, and Tin (from the London Metal Exchange), Crude oil and Gold. The Johansen approach results indicate that Aluminum, Copper, Gold and Nickel share long-run relationships with each other. VEC Granger Causality test at 10% significance level shows that all nine variables are cointegrated with at least one of the remaining variables in the group which indicate the diversification possibilities are limited. As for the price discovery, price development of Aluminum and especially Copper should be given more attention, since they Granger-cause several of the other variables.},
  author       = {Duan, Wenjia and Yusupov, Garib},
  keyword      = {Commodities,Weak Exogeneity,VEC Granger Causality,Johansen Cointegration Test},
  language     = {eng},
  note         = {Student Paper},
  title        = {Long Run Relationships between Base Metals, Gold and Oil},
  year         = {2010},
}