CRUDE OIL AND STOCK MARKET PRICES: EVIDENCE FROM AN EMERGING MARKET

Year 2015, Volume: 24 Issue: 1, 61 - 70, 30.04.2015

Serkan Şahin

Abstract

This paper aims to examine the relation between crude oil and stock market prices for an emerging market, Turkey. Using daily data of Turkish stock market, we examined the relation between oil prices and alternative stock market indicies with Toda Yamamoto (1995) and generalized impulse response analysis. Previous studies fails to find any cointegrating relation running from oil prices to stock market indicies in Turkey. However, it is found in this study that oil prices Granger cause BIST100 index, together with alternative stock market indicies namely the BIST Manufacturing and BIST Technology Index. Findings indicate that oil prices increase the power of forecasting the alternative stock market indicies in Turkey. These results may have important implications for decision-making by investors and national policymakers.

Keywords

Oil Prices, Stock Prices, Toda Yamamoto, Generalized Impulse Response Analyses, Emerging markets

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