Testing The Relationship Between The Metal Prices And Bist-Mining Index Stocks

Mining has become the leading sectors that have shaped civilizations from past to present. In particular, it is impossible to deny the importance of coal and iron in the humanity s development since the industrial revolution. In this century, it is also not possible to sustain human life without mining. Agricultural and mining sectors are considered to be the two main raw producers. Due to the nature of the sector, the input provided to other areas of the economy especially the manufacturing sector, including contributions made directly to the economy, sector has a twofold importance. A developed mining industry, can made contribute the economic indicators like employment, production as well as it can be an important driving force for the manufacturing industry. Therefore, special attention should be given to the sector in the formation of economic development policies and plans. Mining sector also is important in terms of promoting regional development, and it contributes to employment with exposing services and supply industry. Also due to the long process of return of investment, mining sector is extremely risky. Therefore, rise in commodity prices will have negative or positive effects on the future cash flows of the company according the producing, processing or consumption the commodity and may increase or reduce the value of the company. The purpose of this study is to test metal prices (gold, silver, copper) effecting how and to what extend stock prices of 6 mining companies which are traded in Borsa Istanbul. To reach that purpose, both metal and stock prices are analyzed through using monthly data for the period May 2003 to December 2014. Dollar-based prices for the variables used in the study. Whether the long-term relationship between stock prices and metal prices have been tested with the Johansen cointegration method. Results revealed that there has not been a long-term relationship between IHMAD, IPEKE, KOZAA, PRKME and metal prices. The short-term relationship is tested with OLS and findings show that copper has negative effect on IHMAD, gold has positive effect on IPEKE and KOZAA stock prices. Consequently addition to metal prices, investors should be taken into account the other variables when investing to these companies.