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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information
Journal: Business and Economics Research Journal
Title of Article: The Impact of Oil Price Shocks on Sector Indices: Evidence from Borsa İstanbul
Author(s): Gulin Vardar, Guluzar Kurt-Gumus, Mehmet Erdem Delice
Volume: 9
Number: 2
Year: 2018
Page: 271-289
ISSN: 2619-9491
DOI Number: 10.20409/berj.2018.104
Abstract
We analyze the dynamic relationship between daily Brent oil prices and selected sector index returns of Borsa İstanbul. To perform an elaborate analysis, because oil price fluctuations affect sectors differently, the sectoral index returns are classified as oil-user, oil-related, oil-substitute, and financial. Employing Johansen and Juselius (1990) cointegrating technique, the long-run relationship is examined between the oil price changes and sectoral stock returns. After the investigation of the causal relationship between these two variables, Impulse Response Functions and Variance Decomposition Analysis are used to evaluate how shocks to variables rebound through a system. Given that significant changes have occurred across capital markets throughout the period, it would appear to be worthwhile to investigate whether changes in interactions among oil prices and sectoral stock returns have occurred as a result. The findings indicate that; there is cointegration between returns of half of the sectoral indices analyzed and oil prices Granger causes sectoral index returns.

Keywords: Oil Price Shocks, Borsa İstanbul, Sub-sectors, Causality, Variance Decomposition, Impulse Response Function

JEL Classification: E44, Q40

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