Oil prices and sectoral stock returns in the BRICS-T countries: A time-varying approach

Caporale, Guglielmo Maria; Çatık, Abdurrahman Nazif; Huyuguzel Kısla, Gul Serife; Helmi, Mohamad Husam; Akdeniz, Coşkun

Abstract

This paper investigates how exchange rates and oil prices have affected sectoral stock returns in the BRICS-T countries over the period from 2 January 2001 to 22 March 2021. Following the estimation of a benchmark linear model, Bai and Perron (2003) tests are carried out in each case to identify structural breaks, and then a state-space model with time-varying parameters is also estimated. The analysis shows that oil prices have a significant, positive effect on the energy sectors of all BRICS-T countries except India; a negative one on the industrial sectors of all countries except Turkey; a negative one on the financial sectors of Brazil, Russia, India, and South Africa; a negative one on the transportation sectors of India and Turkey and a positive one on that of Russia; finally, the most significant effect is on the chemicals sector, though it varies across countries. The subsamples and time-varying estimates indicate that exchange rate returns have a larger influence than oil price returns. Because energy-dependent sectors are vulnerable to global volatility, appropriate energy regulations should be implemented to reduce risk.

Citation

Caporale, G. M., Çatık, A. N., Huyuguzel Kısla, G. S., Helmi, M. H., & Akdeniz, C. (2022). Oil prices and sectoral stock returns in the BRICS-T countries: A time-varying approach. Resources Policy, 79, Article 103044. https://doi.org/10.1016/j.resourpol.2022.103044

• Journal Article Type: Article
• Acceptance Date: Sep 28, 2022
• Online Publication Date: Oct 8, 2022
• Publication Date: 2022-12
• Deposit Date: Jan 20, 2023
• Publicly Available Date: Jan 20, 2023
• Journal: Resources Policy
• Print ISSN: 0301-4207
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 79
• Article Number: 103044
• DOI: https://doi.org/10.1016/j.resourpol.2022.103044
• Public URL: https://durham-repository.worktribe.com/output/1184984