Assessing the Impact of COVID-19 on Interactions Among Stock, Gold and Oil Prices in India

This chapter explores the relationship between stock and commodity prices in the derivatives market, in the Indian context. In order to estimate the long-term relationship, ARDL model is employed on daily data during the period of 2017–2020. The chapter also incorporates the impact of market disruptions on the relationship, following the recent COVID-19 pandemic. The findings indicate that the stock returns and the prices of crude oil and gold are closely related. Interestingly, findings also suggest that the pandemic has altered the relationship. For example, there was no evidence of cointegration among the stock, gold and crude oil prices during the pre-COVID period. However, post-pandemic, evidence of cointegrating relationships exists. Apart from that, some interesting insights from the short-run relationship between the two markets include a mutual influence on each other in the pre-pandemic period; e.g. stock returns are determined by past values of gold and oil price, whereas stock market returns affect volatility in oil price. However, during the COVID period, volatility of gold prices, in addition to crude oil prices, seems to be driving the stock returns.