Mutual volatility of stock price index, gold and exchange rate: MSVAR approach
Subject Areas : Computational economics
1 - Department of Economics, Behbehan Branch, Islamic Azad University, Behbehan, Iran
Keywords: exchange rate, Stock, Markov-Switching, Gold prices,
Abstract :
The main goal of the current research was to investigate the mutual effects of the stock exchange and two gold and foreign exchange markets using time series 2009(4) - 2022(11). The implementation of Lee-Strazicich unit root test indicates the occurrence of two structural failures in the stock exchange and gold and foreign exchange markets in the decade of 2010. The optimal model, MSIAH-VAR(2), was selected. The findings of the research showed that the behavior of the total stock price index in Tehran Stock Exchange can be evaluated in two regimes (high volatility and low volatility). The results of the regime transition probability matrix indicated the stability and permanence of the low volatility regime and the weak possibility of transition between regimes. Therefore, when explanatory discussions enter the Tehran stock market, there is a possibility that these fluctuations or turbulences (in the form of a regime) will last a long time.The findings of the first model showed that there was a one-way shock transfer from the gold market to the Tehran Stock Exchange during the investigated period. According to the results of the second model, there is a one-way shock transfer from the stock exchange to the currency market. It can be concluded that in the Iranian economy, gold is of special importance in the portfolio of investors. In addition, shares, like currency, are an investment opportunity in the portfolio of Iranian investors.
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