The Effect of Asymmetric Fluctuations of Exchange Rate and Oil Price on Stock Index of Tehran Stock Exchange

Author

Associate Professor, Department of Management, University of Mohaghegh Ardabili. Iran

Abstract

The aim of this study was to investigate the asymmetric effects of exchange rate fluctuations on Stock index of Tehran Stock Exchange. For this purpose, we first calculated the exchange rate fluctuations using model General Autoregressive Conditional Heteroskedastic (GARCH), and then the effect of these fluctuations on the Stock index of Tehran Stock Exchange was estimated using the Generalized Method of Moments (GMM). The data were used daily during the period 2010-2017. Also, the effect of positive and negative fluctuations were separated and included as independent variables in the model. The results of fitting the model indicate that the effect of exchange rate and oil price fluctuations on the Stock index of Tehran Stock Exchange is direct. The results of the model estimation showed that the effect of the positive and negative fluctuations of the exchange rateon Stock Index of Tehran Stock Exchange is asymmetric, so that the effect of the exchange rate increase on the Stock index of stock exchange is far greater than the effect of its reduction. Oil price fluctuations have a direct relationship with the Stock index of Tehran stock exchange.
JEL Classification: D82, C51,E32, G00.

Keywords

References

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International Journal of Business and Development Studies
Volume 12, Issue 1
June 2020
Pages 97-110

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