Czech economics guru visits Sacred Heart

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Sacred Heart University Professor of Economics and International Finance Lucjan Orlowski, left, introduces Czech economics guru Evzenn Kocenda during a class on March 20. (Tracy Deer-Mirek photo)

Czech economist professor Evzen Kocenda of Charles University ‘s Center for Economic Research and Graduate Education in Prague visited Sacred Heart University on March 20 to present findings of a new markets study he had conducted.

Kocenda was a guest speaker in a Global Financial Markets and Institutions class taught by Lucjan Orlowski, professor of economics and iInternational 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.

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

Kocenda will be joining the Department of Economics and Finance during the 2013-14 academic year as SHU’s  first Fulbright Visiting Scholar in the Welch College of Business. He will be collaborating with the university to examine the stability of the European financial markets.

Kocenda’s talk, “Gold, Oil and Stocks,” was being presented for the first time. 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 oover time, and with respect to each other.

Kocenda 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, Kocenda 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 change — 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, Kocenda said. “Over a short-time horizon, iit’s hard to predict, and I don’t believe in forecasting,” he said.

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