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Time-varying impact of oil prices on sectoral stock returns: Evidence from Turkey

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  • Nazif Çatık, Abdurrahman
  • Huyugüzel Kışla, Gül
  • Akdeni̇z, Coşkun

Abstract

This article analyzes the impact of oil price changes on the sectoral stock-market returns of Turkey. For this purpose, asset-pricing models augmented with oil price and exchange rate changes are estimated using daily return data for 12 sectors in the Istanbul Stock Exchange covering the period between January 3, 1997 and August 9, 2018. Test results identify significant structural break points that vary across sectors, indicating the presence of serious parameter instabilities over the investigation period. Therefore, we conclude that linear estimation procedures may not be a convenient tool for capturing asset-pricing behaviors in the market. Time-varying parameter estimates based on a state-space model imply that the impact of oil price returns differ markedly over time and generally have a smaller impact on sectoral returns compared with exchange rate returns. Transportation, banking, chemicals, electricity, food and beverage, metal goods, machinery, and industrials are found to be adversely and significantly affected by oil price increases, whereas most sectors are affected by exchange rate returns over the analysis period.

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  • 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).
  • Handle: RePEc:eee:jrpoli:v:69:y:2020:i:c:s030142072030876x
    DOI: 10.1016/j.resourpol.2020.101845
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    More about this item

    Keywords

    Sectoral stock returns; Oil prices; Time-varying parameter model; Turkey;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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