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The Impact of Oil Price Shocks on Sector Indices: Evidence from Borsa İstanbul

Author

Listed:
  • Vardar, Gulin

    (Izmir University of Economics)

  • Kurt-Gumus, Guluzar

    (Dokuz Eylül University)

  • Delice, Mehmet Erdem

    (University of Salerno,)

Abstract

We analyze the dynamic relationship between daily Brent oil prices and selected sector index returns of Borsa İstanbul. To perform an elaborate analysis, because oil price fluctuations affect sectors differently, the sectoral index returns are classified as oil-user, oil-related, oil-substitute, and financial. Employing Johansen and Juselius (1990) cointegrating technique, the long-run relationship is examined between the oil price changes and sectoral stock returns. After the investigation of the causal relationship between these two variables, Impulse Response Functions and Variance Decomposition Analysis are used to evaluate how shocks to variables rebound through a system. Given that significant changes have occurred across capital markets throughout the period, it would appear to be worthwhile to investigate whether changes in interactions among oil prices and sectoral stock returns have occurred as a result. The findings indicate that; there is cointegration between returns of half of the sectoral indices analyzed and oil prices Granger causes sectoral index returns.

Suggested Citation

  • Vardar, Gulin & Kurt-Gumus, Guluzar & Delice, Mehmet Erdem, 2018. "The Impact of Oil Price Shocks on Sector Indices: Evidence from Borsa İstanbul," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 9(2), pages 271-289, April.
    • Handle: RePEc:ris:buecrj:0326
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    Citations

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    Cited by:

    1. Civcir, Irfan & Akkoc, Ugur, 2021. "Non-linear ARDL approach to the oil-stock nexus: Detailed sectoral analysis of the Turkish stock market," Resources Policy, Elsevier, vol. 74(C).
    2. Nazif Çatık, Abdurrahman & Huyugüzel Kışla, Gül & Akdeni̇z, Coşkun, 2020. "Time-varying impact of oil prices on sectoral stock returns: Evidence from Turkey," Resources Policy, Elsevier, vol. 69(C).

    More about this item

    Keywords

    Oil Price Shocks; Borsa İstanbul; Sub-sectors; Causality; Variance Decomposition; Impulse Response Function;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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