Analyzing the Effect of Monetary Volatility on the Iranian Stock Market
Subject Areas : Econometrics and Financial Applications of other Theories (Stochastic Processes, (Stochastic) Partial Differential Equations, Dynamical Systems)
Nafiseh Vatanchi
1
(
Department of Financial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran
)
MirFaiz Falah Shams Lialestani
2
(
Department of Financial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran
)
Gholamreza Zomorodian
3
(
Department of Financial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran
)
Keywords: Monetary Policy Uncertainty , Stock Market Price Index, VAR Model, EGARCH Model ,
Abstract :
Nowadays, financial markets and especially the stock market are important and undeniable sources of financing for investment toward the economic growth and development of countries. These markets also have a tangible role as a basis for implementing monetary policy. This study aims to investigate the effect of monetary volatility on the seasonal performance of the Iranian stock market from April 2001 to March 2021.The TEDPIX index of the Tehran Stock Exchange was used for designing and explaining the research model for measuring monetary policy uncertainty in terms of the debt of banks to the Central Bank and to measure the Iranian stock market’s performance. With portfolio theory as the theoretical basis for the study, the housing price index and the exchange rate were added to the research model as other independent variables due to their importance to the portfolio of individuals. In this regard, monetary policy uncertainty was first calculated using the exponential general autoregressive conditional heteroskedastic (EGARCH) method. Then, the effect of uncertainty on the TEDPIX index was calculated using the vector auto regression (VAR) statistical method in EVIEWS 12. The findings indicate a significant negative correlation between monetary policy uncertainty and short and long term TEDPIX index. Moreover, exchange rate and housing price index has a significant positive effect on the TEDPIX index.
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