The Impact of Oil Prices on Sectoral Returns: An Empirical Analysis from Borsa Istanbul

Gaye Gencer and Sercan Demiralay
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Gaye Gencer: Business Administration Department, Yeditepe University

No 245, EY International Congress on Economics I (EYC2013), October 24-25, 2013, Ankara, Turkey from Ekonomik Yaklasim Association

Abstract: Oil prices affecting production costs, inflation rates and therefore economic growth, have a direct impact on stock market returns. In the last two decades sharp increases in oil prices led way to stock market collapses which were transmitted to the global economy as downturns. This paper examines the relationship between crude oil prices and sectoral returns of 18 sub-indices from Borsa Istanbul. We use monthly data for the period between January 2002 and April 2013. We apply multivariate time series analysis by conducting VAR (Vector Auto-Regression) and VECM (Vector Error Correction Model) methodology to explore the short-run and the long-run dynamics for the series under investigation. We also employ impulse response and Granger causality methods to investigate the structural relationship between the variables. We figure out a long-run equilibrium relation and a uni-directional causality from oil prices to chemical-petroleum-plastic sub-index as oil prices directly affect the revenues of the companies operating in this sector. For the other sub-indices the empirical results suggest no long-run equilibrium relation.

Keywords: oil price shocks; sector indices; impulse response functions; variance decompositions (search for similar items in EconPapers)
JEL-codes: M2 O16 R11 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2013
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Citations: View citations in EconPapers (6)

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Journal Article: The impact of oil prices on sectoral returns: an empirical analysis from Borsa Istanbul (2013)
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