Finance Essay

1746 words - 7 pages

5/12/2015

Content

1. Introduction-----------------------------------------------------------------------------------1
2. Data -------------------------------------------------------------------------------------------1
3. Methodology ---------------------------------------------------------------------------------3
4. Results ------------------------------------------------------------------------------4
5. Conclusion ---------------------------------------------------------------------------6
6. Reference ----------------------------------------------------------------------------10

Introduction

Oil is an important source of energy in the ...view middle of the document...

S, US dollar exchange rate and price of gold as the most precious metal, and to draw some conclusions about the oil market.
Data

First of all, we have to know correlation between oil price and economic variables, and use the data.
a. Oil price fluctuations and U.S. dollar exchange rate. It is valuable to know more about relationship between oil the price of oil and U.S dollar exchange rate since Lizardo [3] considered that an reverse relationship between oil prices and the value of U.S. Dollar in the long-term more concentrate on an increase in oil prices to a decrease U.S. Dollar rate for the oil exporting countries, and the importers of oil currencies goes down compared to the USD value. Moreover, Akram [4] proved that there is the strength of non-linear negative correlation between the value of the Norwegian krone and the crude oil price used to the 4608 daily observations during January 1, 1986, August 12, 1998 for the ECU index and the Brent. We selected the data of us dollar exchange rate from 12/6/2005 to 12/4/2015.
b. Crude oil and stock market. Park [6] utilized multivariate VAR analysis of the real stock returns of the U.S. and 13 European countries in the period January 1986 to December 2005. The results shows that oil price shocks have 6% a statistically significant impact on real stock returns. So we are going to research the price of oil in the Europe stock market such as UK, France and the Price of oil in the U.S stock market, and examine the relationship between crude oil shocks and stock markets. We selected the data of us crude oil stock price and European crude oil stock price from 12/6/2005 to 12/4/2015.
c. Precious metal prices. From Jain [7] ‘s theory, the higher oil prices lead to increased rates of inflation in oil-importing countries and therefore gave gold investors a hedge against this inflation, depending on the price of gold and precious metals (platinum and silver but we use gold to represent). We examine the interrelationships between the prices of gold. We examine the interrelationships between the prices of gold. We selected the data of gold price from 12/6/2005 to 12/4/2015.
Methodology

Designing a model to predict the prices of crude oil with accuracy to solve the problem of fluctuating oil price while highlighting the most important factors that has impact in the volatile oil prices. First of all, model is used to analyze the positive or negative relationship between the price volatility and variable factors. The second model is used to scale the level of impact from effected factors to price changes.
The relationship between the price volatility and four factors is assumed to be linear. And the coefficient of the volume changes reflects the scale of impact on the price volatility. We can use the least square regression for the main measure to analysis relationships between the price volatility and four factors. As the model below shown, the U.S dollar exchange rate returns, Stock price of...

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