Dynamic linkage among oil prices, gold prices, exchange rate and stock market: A copula based study of selected Asian economies.

Abstract

This research explores the copula-based linkages between oil and gold prices, exchange rates, and  stock markets in five Asian economies: Pakistan, India, Indonesia, Malaysia, and China. Using data from 2017 to 2024 and advanced copula models, we capture the non-linear and tail dependencies among these variables, particularly during periods of financial distress (COVID19). The findings indicate varying degrees of correlation across these economies, with oil price fluctuations significantly affecting stock returns in oil-exporting nations such as Indonesia and Malaysia, while gold prices serve as a stabilizing asset in India and Pakistan. Exchange rate volatility further influences stock market performance, particularly in China. The copula models reflected the non-linear and asymmetric dependencies especially during the extreme scenarios of the market while giving the investors understanding of risk management and portfolio diversification. These findings contribute to a deeper understanding of the interconnectedness of commodity prices, exchange rates, and stock markets in Asian economies, with practical implications for policymakers and investors. It can help investors and financial analysts to gain a better understanding on the interdependence of such variables and can promote their investment decision making process.