doiSerbia

The Turkish stock market integration with oil prices: Cointegration analysis with unknown regime shifts

Halaç Umut (Yaşar University, Turkey)
Dilvin Taşkın Fatma (Yaşar University, Turkey)
Çağlar Çağlı Efe (Dokuz Eylul University, Turkey)

Oil prices are often considered as a vital economic factor due to the dependence of the world economy on oil. The goal of this paper is to contribute to the literature on the dynamic relationship between oil prices and stock prices under the presence of possible structural breaks in an emerging market, Turkey. The empirical evidence suggests that the oil prices are important in explaining the stock market movements. Stock prices, oil prices and nominal exchange rates are found as cointegrated after taking structural breaks into account. Moreover, results of parameter stability test are consistent with our findings indicating that relationship between series is strong in the long-run. The results are important in the way that they show the global factors are also dominant on the Turkish stock market.

Keywords: cointegration, oil price, stock market, structural breaks, Turkey