Volatility spillovers between world oil market and sectors of BIST

Abstract

Nowadays, enormous increase of production and service sectors leads to increase in demand for energy consumption. Therefore, energy and oil consumption in a variety of countries are considerably effected by energy and oil prices. International oil prices are crucial for both oil exporting countries and capital market investors as a means of volatility spillovers. This paper aims to analyze whether volatility spillovers exist between world oil market and several sector indices operating in Borsa Istanbul (BIST) 100 including energy, non-metal mineral products, and transportation using bivariate GARCH (1, 1) model. Estimation results suggest that except for non-metal mineral products sector, there are interactions between oil returns and the underlying sectors in terms of both shocks and conditional variance. © the author(s).