The Contemporaneous and Lagged Interconnectedness Among Crude Oil, Gold, Exchange Rates, and Equity Markets in Iran

Ahmadian-Yazdi, Farzaneh; Mohammadi, Amirreza; Eshaghi, Mohammad

doi:10.22050/pbr.2025.522024.1392

The Contemporaneous and Lagged Interconnectedness Among Crude Oil, Gold, Exchange Rates, and Equity Markets in Iran

Document Type : Original Article

Authors

Farzaneh Ahmadian-Yazdi ¹

Amirreza Mohammadi ²

Mohammad Eshaghi ³

¹ Assistant Professor, Department of Economics, Ferdowsi University of Mashhad, Khorasan, Iran

² Master in Economics, Department of Economics, Ferdowsi University of Mashhad, Khorasan, Iran

³ La Follette School of Public Affairs, University of Wisconsin-Madison, United States of America

https://doi.org/10.22050/pbr.2025.522024.1392

Abstract

This study conducts a comprehensive examination of the interlinkages among four key financial markets—crude oil, gold, currency, and equities—over the July 23, 2013, to March 12, 2025. This study employs the Contemporaneous and Lagged R2 Decomposed connectedness approach recently introduced by Balli et al. (2023), which allows us to decompose the connectedness among variables into lagged and contemporaneous components. As the previous approaches only show overall or contemporary results, this novel approach fills the gap in the literature. The findings reveal that most spillovers occur contemporaneously, with the U.S. dollar playing a central role in the propagation of contemporaneous shocks. In contrast, gold emerges as a significant transmitter of long-term shocks, underscoring its relevance for strategic risk management. Moreover, crude oil is the main receiver of shocks in the average and lagged connectedness in the network. Dynamic analyses indicate heightened market sensitivity during periods of geopolitical tension, particularly under intensified sanctions and currency volatility in Iran. By uncovering the evolving structure of cross-market dependencies, this research offers valuable insights for portfolio allocation, systemic risk assessment, and the formulation of responsive economic policies in times of financial stress.

Highlights

Contemporaneous and Lagged components exhibit different results
In average, Gold is the main net transmitter of shocks, followed by USD, and OIL is the main net receiver of shocks from the network.
Average connectedness shows that in the long term, stock is the best asset for portfolio diversification in order to manage risks.
In contemporary, USD is the main net transmitter of shocks, and stock is the main net receiver of shocks from the network.
In lagged interdependencies, Gold is the primary net transmitter of shocks and oil is the main net receiver of shocks from the network.

Keywords

Risk Spillover

Crude Oil

Stock Market

Contemporeneous and Lagged Effects

Subjects

Oil and Gas Economics and Management

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