Analyzing the Asymmetric Effects of Exchange Rate Movements on an Investment Risk of the Banking Industry Activing in Tehran Stock Exchange Market

Subject Areas : Financial engineering

Maryam Zarezadeh Mahrizi ¹ , Samira Zarei ²

1 - Department of Accounting, West Tehran Branch, Islamic Azad University, Tehran, Iran
2 - Department of Accounting, West Tehran Branch, Islamic Azad University, Tehran, Iran

Received: 2020-07-17 Accepted : 2020-09-02 Published : 2021-03-21

Keywords: Banking industry, : Exchange Rate, Investment Risk, Hybrid Model MS-GARCH,

Abstract :

This study seeks to analyze the effects of exchange rate movements on an investment risk of the banking industry by applying the idea of risk separation into two sorts of the period, the high and low risk. In line with this, the daily time series data, from 26th March 2011 to 19th February 2020, and a hybrid model of exponentially conditional heteroscedasticity and Markov- Switching approaches have been used. The results of this paper, based on the hybris MS-TGARCH model used in the investigations of (Bibi, 2019) and (Aloui and Jammazi, 2020), are statistically significant and prove the accuracy of the hybrid model in the case of Iran. Therefore, based on this finding, it could be possible to more precisely analyze the effects of different determinants on the modelled risk. Regarding this approach, the impacts of exchange rate movement on the investment risk of the banking industry are far more in the high-risk periods than those of low-risk ones.