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Dynamic linkages between strategic commodities and stock market in Turkey: Evidence from SVAR-DCC-GARCH model

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  • Akkoc, Ugur
  • Civcir, Irfan

Abstract

After the financial liberalization in the emerging economies, their stock markets have grown very rapidly in terms of value and volumes. However, a sharp increase in the prices of strategic commodities like oil and gold can have negative effects on the macroeconomics of the emerging economies and their stock markets. This study analyses the dynamic relationship between oil, gold and stock market returns in Turkey. It particularly investigates volatility spillover from oil and gold to the Borsa Istanbul Stock Exchange Index after the global financial crises. Movement of the BIST index with the international oil and gold prices are examined by using different versions of the SVAR-DCC-GARCH framework. The bootstrap causality test which accounts for the non-normal distribution of errors is utilized to specify the SVAR model. Our results support the presence of time-varying co-movement and volatility spillover from gold and oil to the Turkish stock market. Volatilities are high, and gold has stronger impact on the stock market than oil; therefore, gold cannot be used as a safe haven against volatility risk. The results imply that Turkey needs dynamic macroeconomic policies to manage the spillover effects of volatility after the global crisis.

Suggested Citation

  • Akkoc, Ugur & Civcir, Irfan, 2019. "Dynamic linkages between strategic commodities and stock market in Turkey: Evidence from SVAR-DCC-GARCH model," Resources Policy, Elsevier, vol. 62(C), pages 231-239.
    • Handle: RePEc:eee:jrpoli:v:62:y:2019:i:c:p:231-239
    DOI: 10.1016/j.resourpol.2019.03.017
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    More about this item

    Keywords

    Oil price; Gold price; Turkish stock market; Dynamic conditional correlation; DCC-GARCH-SVAR; Bootstrap causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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