The impact of geopolitical index on energy commodities

Abstract

Political crisis and terrorists attacks are affecting the price of all the financial instruments including energy commodities in all over the world. Many analysts and researchers studied the response of oil, gas and gold returns when the geopolitical risk index changes. The results obtained stated that energy prices are stable in disturbance events due to the fact that they are considered as safe havens to investors. So in order to test the response of energy commodities to these events, we conducted several tests. First, monthly data of the return on coal, oil, and natural gas were gathered. Using the quantile regression we studied the effect of the geopolitical risk index on energy commodities. The results found were that the returns on Australians coal, Colombians coal, natural gas US and natural gas Index have a positive impact when GPR index increases unlike the return on South Africas coal, crude oil, liquefied gas and natural gas Europe.