Examination of the relationship between oil price and BIST transportation companies stock prices

Oil is used as both an energy source and industrial raw material. Thus oilhas strategic importance in the markets. Oil and its derivatives are the main raw materials of the transportation sector, constituting the main source of fuels used in land, sea and air transportation. This situation makes oil and petroleum products as important factors for the transportation sector. Therefore, changes in oil prices affect the transportation sector directly. In this study, short and long-term relationship between oil prices and the BIST transportation index (XULAS) and the stock prices of the companies included in the index namely Do&Co Aktiengesellschaft (DOCO), GSD Denizcilik Gayrimenkul İnşaat Sanayi ve Ticaret A.Ş. (GSDDE), Pegasus Hava Taşımacılık A.Ş. (PGSUS), Reysaş Taşımacılık ve Lojistik Ticaret A.Ş. (RYSAS), Türk Hava Yolları A.O. (THYAO), is analysed using monthly data with the ARDL (Autoregressive Distributed Lag) and NARDL (Nonlinear ARDL) bounds test approaches. ARDL and NARDL bounds test approaches are not proper for series containing seasonal and explosive unit roots. Therefore, HEGY (Hylleberg-Engle-Granger-Yoo) seasonal unit root test is employed to determine whether the processes generating the series include seasonal unit roots. Analysis results deminstrate that test equations established for the share prices of DOCO and PGSUS companies include seasonal unit roots. Thus analysis continues with the stock prices of THYAO, CLEBI, RYSAS, GSDDE companies and XULAS index which do not include seasonal unit roots. In order to test whether the series contain explosive roots, the right-tailed unit root test RTADF (Right Tail Augmented Dickey Fuller) is applied. As a result of the test, we conclude that some of the series do not include explosive unit roots. The left-tailed unit root test LTADF (Left Tail ADF) is implemented to determine the order of stationary of the series. The relationship between oil prices and stock prices is modeled symmetrically with the ARDL bounds test approach. Test results indicate that there is no short and long term symmetric relationship between oil prices and the stock prices of XULAS, THYAO, CLEBI, RYSAS companies. The long term symmetric relationship between oil prices and LGSDDE series is determined. With the NARDL bounds test the relationship between oil prices and stock prices is modeled asymmetrically. Findings of the NARDL analysis suggests that; there is only long term relationship between the stock prices of CLEBI, GSDDE and RYSAS companies and oil prices. While there is both a long term and short term asymmetric relationship between the stock prices of THYAO company and oil prices, there is no long and short term relationship between the XULAS index and oil prices. Keywords: BIST transportation index, Oil prices, HEGY Test, ARDL and NARDL bounds test, RTADF unit root test.