Stock Price Synchronicity Based on Uncertainty in Monetary Policies

Subject Areas : Financial Knowledge of Securities Analysis

saeed salehi ¹ , narges yazdanian ² , hoda hemmati ³ , seyedalireza mirarab baygi ⁴

1 - Ph.D. student of Financial Engineering, Rodhan Branch, Islamic Azad University, Iran
2 - Assistant Professor, Department of Accounting, Roudhan Branch, Islamic Azad University, Iran. (Corresponding Author)
3 - Assistant Professor, Department of Accounting, Roudhan Branch, Islamic Azad University, Iran
4 - Assistant Professor, Department of Financial Management, Roudhan Branch, Islamic Azad University, Iran

Received: 2022-01-23 Accepted : 2022-08-27 Published : 2022-11-22

Keywords: Uncertainty, monetary policies, Price Synchronicity,

Abstract :

The purpose of this research was to investigate the role of uncertainty in monetary policies on the synchronicity of company’s stock prices. The statistical population of the research consists of all the companies listed in Tehran Stock Exchange between 2010 and 2019, of which 118 companies have been studied as a statistical sample of the research. The research data were analyzed using regression models using the pooled data method. In order to measure the uncertainty in monetary policies, two methods based on the entropy of exchange rate values and also fitting the GARCH heterogeneous variance model were used. The findings of the regression models showed that the increase in uncertainty in the monetary policies of each period under both the entropy criteria and the GARCH model has an adverse effect on the synchronicity of the stock prices in the future period. Therefore, the degree of stock prices synchronicity in each period can be predicted by relying on the uncertainty of monetary policies of the past period and the company's financial ratios. Also, the results showed that managers' strategies in order to reduce the debt ratio, increase cash retention and under investment to deal with the uncertainty caused by monetary policies, have a moderating effect on the relationship between this uncertainty and price synchronicity and strengthen the size of its effect on the synchronicity of the stock prices in the future period.

References:

• خدمتی سفیدان، حسین (1395). بررسی تأثیر شفافیت و محتوای اطلاعاتی قیمت سهام بر همزمانی بازده سهام در بورس اوراق بهادار تهران، کارشناسی ارشد، دانشگاه آزاد اسلامی واحد الکترونیکی.


• سرتیپی، ساحل (1399). بررسی تأثیر اعتبار تجاری بر همزمانی قیمت سهام شرکت‏های پذیرفته‏شده در بورس اوراق بهادار تهران، کارشناسی ارشد، موسسه آموزش عالی مقدس اردبیلی، گروه حسابداری.


• صفی طرج، عظیمه (1399). بررسی اثر ارتباطات سیاسی و بحران مالی بر عملکرد،ارزش و همزمانی قیمت سهام، کارشناسی ارشد، دانشگاه سمنان، پردیس علوم انسانی، دانشکده اقتصاد، مدیریت و علوم اداری.


• فاریابی، اکبر (1399). اعتبار تجاری و همزمانی قیمت سهام با نقش تعدیلگر محیط اطلاعاتی و تمرکز مشتری در شرکت‏های پذیرفته شده در بورس اوراق بهادار تهران، کارشناسی ارشد، دانشگاه آزاد اسلامی واحد بندر لنگه، گروه حسابداری.


• نصیری، صابر (1399). بررسی تأثیر اعتبار تجاری بر همزمانی قیمت سهام با تاکید بر نوع مالکیت در شرکت‏های پذیرفته‏شده در بورس اوراق بهادار تهران، کارشناسی ارشد، دانشگاه آزاد اسلامی واحد گرمی، گروه حسابداری.


• نیک فلاح لیلی، کیانوش (1397). پایداری سهام توسط سهامداران نهادی و همزمانی قیمت سهام در بازار سرمایه ایران، کارشناسی ارشد، دانشگاه آزاد اسلامی واحد شهر قدس، دانشکده علوم انسانی.


• Al-Thaqeb, S.A., Algharabali, B.G., (2019). Economic policy uncertainty: a literature review. J. Econ. Asym. 20, e00133.


• Baker, S.R., Bloom, N., Davis, S.J., (2016). Measuring economic policy uncertainty. Q. J. Econ. 131 (4), 1593–1636.


• Chan, K., Hameed, A., Kang, W., (2013). Stock price synchronicity and liquidity. J. Financ. Mark. 16 (3), 414–438.


• Chen, J., Jiang, F., Tong, G., (2017). Economic policy uncertainty in China and stock market expected returns. Account. Finance 57 (5), 1265–1286.


• Dang T. L., Dang M., Hoang L., Nguyen L., Phan H. L., (2020). Media coverage and stock price synchronicity, International Review of Financial Analysis, Vol. 67, 101430.


• Demir, E., Ersan, O., (2017). Economic policy uncertainty and cash holdings: evidence from BRIC countries. Emerg. Mark. Rev. 33, 189–200.


• Doan A. T., Phan T., Lin K. L., (2020). Governance quality, bank price synchronicity and political uncertainty, International Review of Economics & Finance, Vol. 69, 231-262.


• Gao H. L., Li J. C., Guo W., Mei D. C., (2018). The synchronicity between the stock and the stock index via information in market, Physica A: Statistical Mechanics and its Applications, Vol. 492, 1382-1388.


• Goodell J., Li M., Liu D., (2021). Price informativeness and state-owned enterprises: Considering their heterogeneity, International Review of Financial Analysis, Vol. 76, 101783.


• Gul, F.A., Kim, J.B., Qiu, A.A., (2010). Ownership concentration, foreign shareholding, audit quality, and stock price synchronicity: evidence from China. J. Financ. Econ. 95 (3), 425–442.


• Gulen, H., Ion, M., (2016). Policy uncertainty and corporate investment. Rev. Financ. Stud. 29 (3), 523–564.


• Jiang, H., Zhou, D., Zhang, J.H., (2019). Analysts’ information acquisition and stock price synchronicity: a regulatory perspective from China. Account. Horiz. 33 (1), 153–179.


• Kim, M.I., Sonu, C.H., Choi, J.H., (2015). Separation of corporate ownership and control and accounting conservatism: evidence from Korea. Asia-Pacific J. Accoun. Econ. 22 (2), 103–136.


• Liu, H., Hou, C., (2019). Does trade credit alleviate stock price synchronicity? Evidence from China. Int. Rev. Econ. Financ. 61 (5), 141–155.


• Long, H., Zaremba, A., Jiang, Y. (2020). Price nonsynchronicity, idiosyncratic risk, and expected stock returns in China, Economic Research- Ekonomska Istraživanja, 33:1, 160-181.


• Narayan, P.K., Phan, D.H.B., Sharma, S.S., (2019). Does Islamic stock sensitivity to oil prices have economic significance? Pac. Basin Financ. J. 53, 497–512.


• Neifar, S., Ajili, H., (2019). CEO characteristics, accounting opacity and stock price synchronicity: empirical evidence from German listed firms. J. Corp. Acc. Financ. 30 (2), 29–43.


• Peng C., Zhu H., Jia X., You W., (2017). Stock price synchronicity to oil shocks across quantiles: Evidence from Chinese oil firms, Economic Modelling, Vol 61, 248-259.


• Qiu, B., Yu, J. & Zhang, K. (2020). Trust and Stock Price Synchronicity: Evidence from China. J Bus Ethics 167, 97–109 (2020).


• Sakaki, H., Jackson, D., Jory, S., (2017). Institutional ownership stability and real earnings management. Rev. Quant. Finan. Acc. 49 (1), 227–244.


• Shen, H., Lan, F., Xiong, H., Lv, J., Jian, J., (2020). Does top management Team’s academic experience promote corporate innovation? Evidence from China. Econ. Model. 89, 464–475.


• Shen, H., Zheng, S., Xiong, H., Tang, W., Dou, J., Silverman, H., (2021). Stock market mispricing and firm innovation based on path analysis. Econ. Model. https://doi.org/10.1016/j.econmod.2020.03.001.


• Wang, Y., Chen, C.R., Huang, Y.S., (2014). Economic policy uncertainty and corporate investment: evidence from China. Pac. Basin Financ. J. 26, 227–243.


• Xiong, H., Wu, Z., Hou, F., Zhang, J., (2020). Which firm-specific characteristics affect the market reaction of Chinese listed companies to the COVID-19 pandemic? Emerg. Mark. Financ. Trade 56 (10), 2231–2242.


• Zhang, G., Han, J., Pan, Z., Huang, H., (2015). Economic policy uncertainty and capital structure choice: evidence from China. Econ. Syst. 39 (3), 439–457.