The interactions between oil prices and Borsa Istanbul sector indices

Efe Çağlar Çağlı, Fatma Dilvin Taşkın and Pınar Evrim Mandacı

International Journal of Economic Policy in Emerging Economies, 2014, vol. 7, issue 1, 55-65

Abstract: This paper investigates the effects of the US crude oil prices (OIL) on some selected sub-sector indices of the Borsa Istanbul (BIST) including BIST-Chemical Petroleum, Plastic, (BIST-CHE), BIST-Textile-Leather (BIST-TEX), BIST-Metal Products, Machinery (BIST-MET), BIST-Transportation (BIST-TRS), BIST-Electricity (BIST-ELC), BIST-Food Beverage (BIST-FOB), BIST-Wood-Paper-Printing (BIST-WPP), and BIST-Wholesale and Retail Trade (BIST-WRT). We employ the vector fractionally integrated autoregressive moving average (VARFIMA) model to examine the linkages between the OIL and the selected sub-sector indices by using daily data between 1997 and 2012 including the recent global financial crises. Our results indicate that while the stock price series of some sub-sector indices are non-stationary, but mean-reverting, those of some others are non-stationary and non-mean reverting. The changes in the oil prices have permanent effects on itself and on the levels of the selected subsector indices. The empirical results show that oil prices and the selected sub-sector indices are significantly interconnected.

Keywords: crude oil prices; stock markets; Borsa Istanbul; sector indices; Turkey; emerging markets; VARFIMA; long memory; fractional integration; impulse response. (search for similar items in EconPapers)
Date: 2014
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