March

Czech Economic Guru Evžen Kočenda Visits SHU

Evžen Kočenda

News Story: March 25, 2013

On Wednesday evening, March 20, prominent Czech economist Professor Evžen Kočenda of Charles University’s Center for Economic Research and Graduate Education in Prague visited Sacred Heart University to present findings of a new markets study he had conducted.

Kočenda was a guest speaker in a Global Financial Markets and Institutions class taught by Lucjan Orlowski, professor of Economics and International Finance and chairman of the Department of Economics and Finance in the John F. Welch College of Business at SHU. The presentation was attended by both students and faculty, who were excited to meet and hear from Kočenda.

“Professor Kočenda has been a prolific scholar, influential in financial econometrics and has published many papers on European financial market stability,” said Orlowski. “He has made many contributions to the body of knowledge in economics.”

Regarding Kočenda, Orlowski also shared some good news for the University. “I am very pleased to announce that Professor Kočenda will be joining the Department of Economics and Finance during the upcoming 2013/14 academic year as our very first Fulbright Visiting Scholar in the Welch College of Business. He will be collaborating with us to examine the stability of the European financial markets.”

Kočenda’s talk, titled “Gold, Oil and Stocks” was being presented for the first time according to the Czech professor. It was a joint research project with two colleagues, Jozef Barunik and Lukas Vacha. The research asked how prices of gold, oil and stocks behave over time, and with respect to each other. “Do they move together and, if so, at various investment horizons?” posed Kočenda. “Does one lead another? And how fast do the markets process information?”

Kočenda shared that only 171,300 tons of gold have been mined in history, a relatively small amount, which, he said, surprised him “given all the fuss” over the commodity. Oil, on the other hand, essentially governs the world, with 88 million barrels of crude oil consumed per day. Stocks provide a link on economic development and reflect how the market is doing, Kočenda explained.

The trio studied the NYMEX (crude oil), COMEX (gold) and S&P 500 Futures markets in their study, tracking the period from 1987 to 2012.

Research showed that the market behavior of gold and oil prices changed after 9/11 in 2001 and that the early 1990s economic crisis also had quite an impact on oil and its correlations. During the period from 1987 until just before the subprime mortgage crisis, the markets were heterogeneous. The correlations between gold and oil exhibit remarkable differences at diverse investment horizons. Since 2008, the pattern changed – the markets became quite homogenous, with investors not perceiving large differences in investment horizons.

The study’s overall finding was that gold, oil and stocks are not correlated, or at least not to the extent usually believed. In terms of applying the research to market forecasting, Kočenda said: “Over a short-time horizon, it’s hard to predict, and I don’t believe in forecasting.”