The Effect of Variations in Gold and Oil Prices on BIST 100 Index

Abstract

It is commonly known that the factors that are affecting stock prices are macroeconomic variables, returns on alternative investment means, political and social stability, developments in other countries, risk preferences of domestic and foreign investors, information regarding companies and manipulations. Due to the effect of financial globalization and as local capital has transformed into an international quality, individual country economies are now more fragile against not only internal dynamics but external factors as well. Under these circumstances, the Borsa Istanbul is a stock market which has recently been popular for investors who carefully chase and direct their investments toward this spot. The present study, except the generally adopted economical factors, investigates the effect of variations in gold and oil prices on BIST 100 index econometrically. The reason for analyzing the effect of gold prices is that the global interest toward gold metal has increased overwhelmingly which caused major central banks of both developing and developed world countries increased their gold reserves. This tendency created a serious increased demand for gold which accordingly has led increased prices in the global market and affected other macro economical variables. The reason for analyzing oil prices is that fluctuation in oil prices affects economical factors both directly and indirectly. Whereas the BIST 100 index has positive relationship with oil prices; it has negative relationship with gold prices.

DOI: 10.5901/mjss.2013.v4n10p726