Oil Prices and Firm Returns in an Emerging Market

This study examines the oil price effect on Turkish stock market as an emerging country on firm level data. After controlling short term interest rate, nominal exchange rate and crude oil price, we find that firms behave differently to a change in oil prices. The findings include these: i) variations in oil prices do not significantly affect Turkish firm returns. Out of 153, only 38 firms are affected significantly by oil price after controlling exchange rate and interest rate; ii) oil prices influence stock returns of Turkish firms, suggesting that under reaction and gradual information diffusion hypotheses may hold. iii) small and middle-sized firms are more affected negatively from oil price changes, where large-sized firms affected more positively. The empirical findings of this study have potential implications and offer significant insights for both practitioners and policy makers

Value-at-risk Predictions of Precious Metals with Long Memory Volatility Models

In this paper, we investigate the value-at-risk predictions of four major precious metals (gold, silver, platinum, and palladium) with long memory volatility models, namely FIGARCH, FIAPARCH and HYGARCH, under normal and student-t innovations’ distributions. For these analyses, we consider both long and short trading positions. Overall, our results reveal that long memory volatility models under student-t distribution perform well in forecasting a one-day-ahead VaR for both long and short positions. In addition, we find that FIAPARCH model with student-t distribution, which jointly captures long memory and asymmetry, as well as fat-tails, outperforms other models in VaR forecasting. Our results have potential implications for portfolio managers, producers, and policy makers

The Impact of Oil Price Volatility to Oil and Gas Company Stock Returns and Emerging Economies

In this paper, we examine the impact of oil price shocks on both selected companies and emerging markets. The novelties of this study can be described as: i) it also includes the recent oil price crisis compared to previous articles in this field, ii) our study considers in details the oil and gas company business acumen to explain the results of the econometric models which is not the case in previous studies, iii) we also include the impact of oil price volatility on emerging markets since oil prices have an importance as explanatory variable of exchange rate movements which makes out study a very comprehensive one. As mostly preferred in many previous studies in this literature, we employed the exponential GARCH (EGARCH) estimation methodology, we concluded that the volatility effect of a given shock to the oil prices and oil and gas company stock price returns are highly persistent and the successive forecasts of the conditional variance converge to the steady state slowly. In addition, we also present The News Impact Curves (NIS) which indicate that the behavior of commodity prices and company stock prices react differently to bad and good news. Keywords: Oil prices, time series, asymmetric volatility, stock returns, oil and gas companies, news impact curves JEL Classifications: Q4, Q4

Links Between Commodity Futures And Stock Market: Diversification Benefits, Financialization And Financial Crises

In this paper, we analyze time-varying correlations between commodity markets and S&P 500 index, employing a recent and novel technique: asymmetric dynamic conditional correlation (ADCC) model. Using weekly data from January 3, 1992 to December 27, 2013, we provide evidence of highly volatile correlations, which substantially increase after the 2007-2008 financial crisis. We also find that conditional correlations and variances are positively linked in overall, which implies deterioration in diversification benefits. Finally, we examine the impacts of financial crises on the conditional correlations and find that external shocks have different effects on the correlations. Our results have potential implications for investors, portfolio managers, commodity producers and policy makers

Impact of Vertical Integration on Electricity Prices in Turkey

Government's active participation in to the energy markets requires us to understand its vertical and horizontal integrated involvement. Coherently, in order to diversify their portfolios and reduce their business risks, vertical integration of the major private players in the market is another important topic. Under these market conditions market power becomes prominent. Our paper utilizes ARX models to analyze market power and portfolio diversification impact on electricity prices. In the aggregate models since we used high frequency time series data for all bidding hours of day ahead market, autoregressive structure within the system marginal prices vitiated the effect of power production type. Accordingly, we benefited different hours of the day as separate time series where a baseload (hour 24) and a peak hour (hour 11) were selected. The contribution of our paper to the policy debate is to highlight that such issues exist in the first place and that market power remains an important concern in Turkish electricity market. Keywords: Electricity Prices, Renewable Energy, Time Series, Market Power, Vertical Integration JEL Classifications: Q2, Q4, Q4

The EU Custom Union on Trade Specialisation and Labour Market: Implications for Turkish Industries

ABSTRACT The purpose of this paper is to analyze the labor market implications of the EU Custom Union membership of Turkey by using detailed trade data and presenting a geometric tool on trade specialization. Theories suggest that trade expansion through integration may create inefficiency in labor market due to rigidities in factor prices and mobility of factors. Different formation of trade, such as intra-industry trade (IIT, the export and import of similar goods) may, however, entail smaller labor-market adjustment costs than inter-industry trade. Results show that Turkish membership to the EU Custom Union has not improved the specialization procedure in trade. Results further imply that labor market has encountered big adjustment problems

Value-at-risk Predictions of Precious Metals with Long Memory Volatility Models

In this paper, we investigate the value-at-risk predictions of four major precious metals (gold, silver, platinum, and palladium) with long memory volatility models, namely FIGARCH, FIAPARCH and HYGARCH, under normal and student-t innovations’ distributions. For these analyses, we consider both long and short trading positions. Overall, our results reveal that long memory volatility models under student-t distribution perform well in forecasting a one-day-ahead VaR for both long and short positions. In addition, we find that FIAPARCH model with student-t distribution, which jointly captures long memory and asymmetry, as well as fat-tails, outperforms other models in VaR forecasting. Our results have potential implications for portfolio managers, producers, and policy makers

The Behavior of Istanbul Stock Exchange Market: An Intraday Volatility/Return Analysis Approach.

This study investigates intraday effects in the Istanbul Stock Exchange (ISE) during the latest period of financial turmoil which began in August 2007 and extended to February 2010. We tested for the possible existence of intraday anomalies using both return and volatility equations, empirically applying GARCH (p,q) models. The unique data set we utilized was compiled from 15-min intraday values of the ISE-100 Index which are formed by averaging historical ten-second tick data. This study contributes to the current literature in three distinct ways. Firstly, the basic characteristics of the unique data used in this research were investigated in detail. Secondly, four range-based volatility measures, namely Garman Klass (GK), Yang-Zhang (YZ), Rogers-Satchell (RS) and Parkinson (PK), were employed to take more precise measurements of volatility for intraday data analysis in order to identify the changes in general market sentiment using opening, closing, high and low prices. Thirdly, we estimated the relative efficiency of GK, YZ, RS and PK by applying GARCH (p,q) models. The results are quite promising, indicating that strong opening price jumps are present for daily and morning calculations. They illustrate that the YZ estimator has relatively more power in generating tolerable volatility patterns

The Behavior of Istanbul Stock Exchange Market: An Intraday Volatility/Return Analysis Approach.

This study investigates intraday effects in the Istanbul Stock Exchange (ISE) during the latest period of financial turmoil which began in August 2007 and extended to February 2010. We tested for the possible existence of intraday anomalies using both return and volatility equations, empirically applying GARCH (p,q) models. The unique data set we utilized was compiled from 15-min intraday values of the ISE-100 Index which are formed by averaging historical ten-second tick data. This study contributes to the current literature in three distinct ways. Firstly, the basic characteristics of the unique data used in this research were investigated in detail. Secondly, four range-based volatility measures, namely Garman Klass (GK), Yang-Zhang (YZ), Rogers-Satchell (RS) and Parkinson (PK), were employed to take more precise measurements of volatility for intraday data analysis in order to identify the changes in general market sentiment using opening, closing, high and low prices. Thirdly, we estimated the relative efficiency of GK, YZ, RS and PK by applying GARCH (p,q) models. The results are quite promising, indicating that strong opening price jumps are present for daily and morning calculations. They illustrate that the YZ estimator has relatively more power in generating tolerable volatility patterns

The Impact of Short Selling on Intraday Volatility: Evidence from the Istanbul Stock Exchange

This paper examines the interrelation between short selling and volatility as differing from previous research in that it focuses on intraday activities rather than the daily price movements. We demonstrate that the effects of short selling activity changes during the two sessions of the day and rest of trading hours. The study also presents evidence that there is a considerable amount of short selling activity in the Istanbul Stock Exchange(ISE), particularly at the beginning of opening sessions, which significantly impacts the volatility of the market for the rest of the trading day