Abstract:

The aim of this study is to assess the impact of oil price changes on stock prices. We believe that the possible relationship between oil prices and capital markets could be used as a guide in terms of valuing capital market instruments. Thus, the study analyzes the impact of change in crude oil prices and stock market returns on petrochemical industry index returns using a two-factor model. Accordingly, industry (ISE Oil, Chemical and Plastic Index) risk premium, crude oil price changes and stock market index (ISE 100) data were used in the regression analysis for the years between 2003 and 2012. The study attempts to explain industry risk premium via aforementioned explanatory variables both in a six-month subperiod daily setting and in a consecutive monthly setting. The regression results yield significant results when monthly analysis performed while results yield significant results for three distinct sub-periods when six-months sub-periods analysis performed

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