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Crude Oil Price Shocks and Stock Returns: Evidence from Turkish Stock Market under Global Liquidity Conditions

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  • Berk, Istemi

    () (Energiewirtschaftliches Institut an der Universitaet zu Koeln)

  • Aydogan, Berna

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln)

Abstract

The purpose of this study is to investigate the impacts of crude oil price variations on the Turkish stock market returns. We have employed vector autoregression (VAR) model using daily observations of Brent crude oil prices and Istanbul Stock Exchange National Index (ISE-100) returns for the period between January 2, 1990 and November 1, 2011. We have also tested the relationship between oil prices and stock market returns under global liquidity conditions by incorporating a liquidity proxy variable, Chicago Board of Exchange’s (CBOE) S&P 500 market volatility index (VIX), into the model. Variance decomposition test results suggest little empirical evidence that crude oil price shocks have been rationally evaluated in the Turkish stock market. Rather, it was global liquidity conditions that were found to account for the greatest amount of variation in stock market returns.

Suggested Citation

  • Berk, Istemi & Aydogan, Berna, 2012. "Crude Oil Price Shocks and Stock Returns: Evidence from Turkish Stock Market under Global Liquidity Conditions," EWI Working Papers 2012-15, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
  • Handle: RePEc:ris:ewikln:2012_015
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    Cited by:

    1. Trust Kganyago & Victor Gumbo, 2015. "An Empirical Study of the Relationship between Money Market Interest Rates and Stock Market Performance: Evidence from Zimbabwe (2009-2013)," International Journal of Economics and Financial Issues, Econjournals, pages 638-646.
    2. repec:asi:ajemod:2017:p:194-207 is not listed on IDEAS
    3. repec:eco:journ2:2017-05-35 is not listed on IDEAS

    More about this item

    Keywords

    Oil Price Shocks; Stock Returns; Liquidity; VAR Model;

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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