The Impact of Oil Prices on Real Stock Returns

Abstract

This study examines the impacts of oil shocks on real stock returns in Turkey by using the vector autoregressive model (VAR). It analyzes over the 2008:10-2018:04 period. The logic lying behind this periodization is to analyze the impacts of oil prices on real stock returns for the 2008 post-crisis period. According to the results obtained, real stock returns have a positive and a statistically insignificant response to oil price shocks at the beginning. This is inconsistent with the expectations of economic theory. This inconsistency has several reasons, but the flow of foreign portfolio investment to developing countries may be a decisive factor after the financial crisis of 2008. This flow of foreign investment may have had an impact on stock returns in developing countries such as Turkey, especially when the interest rates were lowered to almost zero in developed countries following the financial crisis of 2008.