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

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 betw...

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Bibliographic Details
Published in:Resources policy 2020-12, Vol.69, p.101845, Article 101845
Main Authors: Nazif Çatık, Abdurrahman, Huyugüzel Kışla, Gül, Akdeni̇z, Coşkun
Format: Article
Language:English
Subjects:
Assets
Banking
Chemicals
Electricity
Food
Foreign exchange rates
Impact analysis
Machinery
Metals
Oil prices
Parameter estimation
Petroleum
Prices
Sectoral stock returns
Securities markets
State space models
Stock exchanges
Stocks
Time of use electricity pricing
Time-varying parameter model
Turkey
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Summary: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. •The impact of oil price changes on the sectoral stock market returns in Turkey is investigated.•Sectoral asset-pricing models are estimated.•Significant structural breaks and time-variation are found.•The effects of oil price and exchange rate risks vary markedly across sectors and over time.
ISSN:0301-4207
1873-7641
DOI:10.1016/j.resourpol.2020.101845