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The impact of oil prices on the stock returns in Turkey: A TVP-VAR approach

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  • Toparlı, Elif Akay
  • Çatık, Abdurrahman Nazif
  • Balcılar, Mehmet

Abstract

This paper aims to analyze the effect of crude oil price shocks and macroeconomic variables on the Turkish stock market. To this aim, a time-varying parameter vector autoregression model (TVP-VAR) is estimated by using monthly data covering the period from February 1988 to March 2017. The time-varying responses and forecast error decompositions indicate that the impact of the variables on the stock market returns show substantial time variation. The effect of real crude oil price shocks is lower compared to those of exchange rate and interest rate. Output shock has a positive effect on stock returns, as expected. The time-varying forecast error decomposition suggest that stock returns are largely explained by the variations in exchange rate and interest rate.

Suggested Citation

  • Toparlı, Elif Akay & Çatık, Abdurrahman Nazif & Balcılar, Mehmet, 2019. "The impact of oil prices on the stock returns in Turkey: A TVP-VAR approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 535(C).
    • Handle: RePEc:eee:phsmap:v:535:y:2019:i:c:s0378437119313755
    DOI: 10.1016/j.physa.2019.122392
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    5. Wang, Xiangning & Huang, Qian & Zhang, Shuguang, 2023. "Effects of macroeconomic factors on stock prices for BRICS using the variational mode decomposition and quantile method," The North American Journal of Economics and Finance, Elsevier, vol. 67(C).

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