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The impact of oil price shocks on the volatility of the Turkish stock market

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  • F. Dilvin TaÅŸkin
  • Efe ÇaÄŸlar ÇaÄŸlı
  • Umut Halaç

Abstract

The objective of this paper is to examine the impact of oil price shocks on the volatility of Istanbul Stock Exchange National 100 index (ISE-100), ISE sector indices including ISE-financial (ISE-FIN), ISE-industrial (ISE-IND), and ISE-Service (ISE-SRV) applying EGARCH model of Nelson (1991) for the period spanning from January 1988 to April 2012. Our empirical analysis considers the volatility shifts due to the structural breaks in modelling volatility so that the modified version of the ICSS algorithm of Inclan and Tiao (1994) is used to detect possible volatility shifts. EGARCH model is conducted across both full-sample and sub-samples. The results reveal that the parameter estimates of variance equation in EGARCH models change across samples. This suggests that variance breaks are empirically a relevant feature of ISE and sector indices in a developing country, Turkey. ISE-100 and sector indices have unique characteristics and the characteristics have to be taken into account.

Suggested Citation

  • F. Dilvin TaÅŸkin & Efe ÇaÄŸlar ÇaÄŸlı & Umut Halaç, 2016. "The impact of oil price shocks on the volatility of the Turkish stock market," International Journal of Accounting and Finance, Inderscience Enterprises Ltd, vol. 6(1), pages 1-23.
    • Handle: RePEc:ids:intjaf:v:6:y:2016:i:1:p:1-23
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