Energy prices-share prices relationship: MARS analysis in BIST manufacturing industry sector

Energy is one of the most important factors contributing to the economic and social development levels of countries by increasing their competitiveness globally. Fossil fuels such as oil, natural gas, and coal are at the forefront of the important energy sources for countries, the importance of electrical energy, as a secondary energy source, is gradually increasing due to technological developments. It is known that the historical prices trends of these energy resources are important for many countries with high energy dependence and that increases in energy prices create a cost factor for energy importing countries. In this context, it is observed that the increase in energy costs has increased production costs on many sectors that need energy input; while the increasing costs have negatively affected the profits of the companies in the relevant sectors and decreased the share prices. Considering the importance of energy prices, it is noteworthy that there are many studies in the relevant literature investigating the relationship between energy prices and stock prices and revealing the importance of energy prices for the capital market. However, it is determined that differentiation in terms of sample size, time period, or methodology in these studies leads to the emergence of contradictory findings regarding the relationship between energy prices and stock prices. This study aims to investigate the effect of the change in energy prices on the sub-index prices of the BIST manufacturing industry sector. For this purpose, the relationship between energy prices and stock prices has been tested by using the Multivariate Adaptive Regression Splines (MARS) model for the period January 2010-December2019. The findings have revealed that energy (oil, natural gas, and electricity) prices have effects on the sub-index prices of the industrial sector at different significance levels. In parallel, it is determined that oil prices affect the XUSIN, XMANA, XMESY, XTAST, XTEKS, XGIDA, XKAGT, and XKMYA indices by 100%; natural gas prices affect the XMANA, XTAST, XKAGT, and XUSIN indices by 83%, 54%,61%, and 59% respectively; electricity prices effect the XMANA, XUSIN, XTEKS, XKAGT, and XKMYA indices by 84%, 68%, 79%, 55%, and 73% respectively.