The Effect of Exchange Rate Volatility on the Iran Stock Market Exchange
Subject Areas : Financial Knowledge of Securities Analysis
مهدی
پدرام
1
(ندارد)
Keywords: real effective exchange rate, stock market returns, trade deficit, EGARCH,
Abstract :
This paper looked at the relationship between Stock Markets and ForeignExchange rates, and determined whether movements in exchange rates had an effecton stock market in Iran. The Exponential Generalized Autoregressive ConditionalHeteroskedascity (EGARCH) model was used in establishing the relationship betweenexchange rate volatility and stock market volatility. It was found that there waspositive relationship between exchange rate volatility and stock market returns.Additionally, there is volatility persistence in most of the macroeconomic variables. Itwas also revealed that an increase (decrease) in trade deficit and expectation in futurerise in trade deficit would decrease (increase) stock market volatility. In addition, theconsumer price index has a significant relationship with stock market volatility.
