Correlation Analysis of Stock Exchange Index, Oil price, Exchange Rate and Gold price: A Wavelet Decomposition Method

Subject Areas : Journal of Investment Knowledge

Nima Pazoki ¹ , Akram Hamidian ² , Shapour Mohammadi ³ , Vahid Mahmoudi ⁴

1 - M.A Finance
2 - M.A Finance
3 - Assistant professor in Tehran University
4 - Associate professor in Tehran University

Received: 2013-02-08 Accepted : 2013-05-15 Published : 2013-05-15

Keywords: Wavelet Transform, Correlation, Stock Exchange Index, Time Scale,

Abstract :

One of the important issues in the financial markets topic is the relation between the prices of valuable commodities like oil and gold and the various exchange rates. Wavelets are mathematical functions for analyzing the time series into their components in various time scales. In this paper firstly the time series of oil price, various exchange rate & gold price are analysis to their components in various time scales by wavelet transform and then the correlation between these components are studied. The results showed that the correlation between these variants are different in the various time scales and also is different from the direct correlation of them. In the case that the direct correlation between the variants is not meaningful we can get valuable correlation in various time scales.