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

Nazif Catik (), Gül Huyugüzel Kışla and Coşkun Akdeni̇z

Resources Policy, 2020, vol. 69, issue C

Abstract: 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.

Keywords: Sectoral stock returns; Oil prices; Time-varying parameter model; Turkey (search for similar items in EconPapers)
JEL-codes: C5 C58 G12 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:69:y:2020:i:c:s030142072030876x

DOI: 10.1016/j.resourpol.2020.101845

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