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Oil Prices, Exchange Rates and Sectoral Stock Returns in the BRICS-T Countries: A Time-Varying Approach

Author

Listed:
  • Guglielmo Maria Caporale
  • Abdurrahman Nazif Catik
  • Gül Serife Huyugüzel Kisla
  • Mohamad Husam Helmi
  • Coskun Akdeniz

Abstract

This paper analyses the effects of oil prices and exchange rates on sectoral stock returns in the BRICS-T countries over the period from 2 January 2001 to 22 March 2021. After estimating a benchmark linear model, the possible presence of structural breaks is investigated using the Bai and Perron (2003) tests, and a state-space model with time-varying parameters is then estimated. The main findings can be summarised as follows. Both the sub-samples and the time-varying estimates indicate a greater role for exchange rate returns. Oil prices have a positive and significant impact on the energy sector in all countries except India; a negative and significant one on the financial sector of Brazil, Russia, India, and South Africa; no effect on the transportation sector of Brazil, China, and South Africa, a negative one on those of India and Turkey, and a positive one in the case of Russia. The vulnerability of energy-dependent sectors to global fluctuations implies that appropriate energy policies should be adopted to reduce risk.

Suggested Citation

  • Guglielmo Maria Caporale & Abdurrahman Nazif Catik & Gül Serife Huyugüzel Kisla & Mohamad Husam Helmi & Coskun Akdeniz, 2021. "Oil Prices, Exchange Rates and Sectoral Stock Returns in the BRICS-T Countries: A Time-Varying Approach," CESifo Working Paper Series 9322, CESifo.
    • Handle: RePEc:ces:ceswps:_9322
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    More about this item

    Keywords

    oil prices; exchange rates; sectoral stock returns; structural breaks; time-varying parameters;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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