The Effect of Shockes of Selected Domestic and Foreign Markets on the Volatilities of Investment Return in Tehran Stock Exchange: DCC-FIAPARCH Model

Subject Areas : Journal of Investment Knowledge

Leila Argha ¹ , Mohammad Mowlaei ² , Abolfazl Shahabadi ³ , Mohsen Khezri ⁴

1 - Ph.D candidate in Economics, Department of Economics, Bu-Ali Sina University, Hamedan, Iran
2 - Associate professor, Department of Economics, Bu-Ali Sina University, Hamedan, Iran
3 - Professor, Faculty of social sciences and Economics, Alzahra university, Tehran, Iran,
4 - Assistant professor, Department of Economics, Bu-Ali Sina University, Hamedan, Iran

Received: 2019-01-15 Accepted : 2019-03-04 Published : 2021-03-21

Keywords: : Stocks, Dynamic conditional correlation, DCC-FIAPARCH, foreign assets, domestic assets,

Abstract :

One of the features of a financial market, the stock market in particular, is its affectability from other financial and non-financial markets. regarding the importance of this issue, the present study aimed at investigating the dynamic conditional correlation (DCC) between the returns on the domestic and foreign assets in monthly data (oil, industry, exchange and base metals including total, copper, steel) and returns on the stock price index in Iran during March 2001 to April 2017 using the DCC-FIAPARCH approach. The obtained results indicated a statistically significant and positive DCC coefficient difference between the metals, industrial products, and copper returns with the stocks returns. Consequently, it is not possible to put each of these assets with the stocks in an identical situation (purchase or sale), but instead they should be always placed in opposite situations for the purpose of risk control. However, with regard to other assets, the DCC was not significant; accordingly, the assets can be placed in the investment portfolio together with the stocks although the presence of such assets in the given portfolio did not help to reduce the portfolio risk.

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