SHORT- AND LONG-RUN ASYMMETRIC EFFECT OF OIL PRICE SHOCKS ON BIST100 RETURN INDEX: EVIDENCE FROM NARDL ANALYSIS

Abstract

This paper examines the nonlinear effects of different three types of oil price shocks, proposed by Ready (2018), namely, supply, demand, and risk shocks on BIST100 return index based on monthly data from January 2003 to January 2019 using a recently developed approach non-linear autoregressive distributed lags -NARDL model. Our result shows that there is a nonlinear cointegration relationships between three types of oil price shocks and BIST100 return index and results also shows that the impacts of positive and negative changes in the oil price shocks on stock return substantially vary in the short-and long-run. The long-run coefficients of positive and negative oil demand shocks, respectively, are positive and negative but the positive demand shock is greater economic impact of the negative demand shock. This means that stock returns are more affected by global demand growth in Turkey Further, the positive oil supply and positive risk shocks led to reduce stock return and negative supply and negative risk shocks led to raise stock return. In terms of the total effect, both the positive oil supply and positive risk shocks are greater impact in causing decrease stock returns during this period.