Title: The impact of oil price shocks on the volatility of the Turkish stock market
Authors: F. Dilvin Taşkin; Efe Çağlar Çağlı; Umut Halaç
Faculty of Economics and Administrative Sciences, Department of Business Administration, Yaşar University, Bornova, Izmir, Turkey
Faculty of Business, Department of Business Administration, Dokuz Eylül University, Kaynaklar Campus, Izmir, Turkey
Department of Economics, Faculty of Economics and Administrative Sciences, Yaşar University, Bornova, Izmir, Turkey
Abstract: The objective of this paper is to examine the impact of oil price shocks on the volatility of Istanbul Stock Exchange National 100 index (ISE-100), ISE sector indices including ISE-financial (ISE-FIN), ISE-industrial (ISE-IND), and ISE-Service (ISE-SRV) applying EGARCH model of Nelson (1991) for the period spanning from January 1988 to April 2012. Our empirical analysis considers the volatility shifts due to the structural breaks in modelling volatility so that the modified version of the ICSS algorithm of Inclan and Tiao (1994) is used to detect possible volatility shifts. EGARCH model is conducted across both full-sample and sub-samples. The results reveal that the parameter estimates of variance equation in EGARCH models change across samples. This suggests that variance breaks are empirically a relevant feature of ISE and sector indices in a developing country, Turkey. ISE-100 and sector indices have unique characteristics and the characteristics have to be taken into account.
Keywords: emerging markets; oil prices; Istanbul stock exchange; Turkey; EGARCH; price shocks; market volatility; stock markets.
Int. J. of Accounting and Finance, 2016 Vol.6, No.1, pp.1 - 23
Date of acceptance: 18 Jan 2016
Available online: 12 May 2016