Interaction Between the Prices of Crude Oil, Natural Gas, and Gold with Conventional and Sustainability Stock Market Indices

Abstract

Since the release of the Brundtland Report (Brundtland, 1987), environmental issues and sustainable growth have gained increasing attention worldwide. This study analyzes the relationship between crude oil prices, natural gas prices, gold prices, Dow Jones Sustainability World Index (W1SGI), and Dow Jones Industrial Average Index (DJI) using time series econometrics. The monthly data set covers the December 2011–November 2021 period. Empirical results show that the speed of adjustment to the long-run equilibrium is 8.4% for W1SGI and 3.3% for DJI. In the long run, the effect of crude oil prices and gold prices on both stock market indices are negative and positive, respectively; however, natural gas prices have a positive impact just on W1SGI. Besides, crude oil prices have a bidirectional and unidirectional causal relationship with W1SGI and DJI. Our findings could assist investors in formulating their hedging and diversification strategies. In addition, obtained results could be useful for policymakers to design policies in line with the objectives of international environmental agreements. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.