Does oil price uncertainty affect the Tehran Stock Exchange index? Quantile regression approach based on wavelet transform

Subject Areas : Financial Economics

Ali  Sargolzaei ¹ (Department of Economics, Faculty of Administrative and Economic Sciences, Ferdowsi University, Mashhad, Iran.)
Narges  Salehnia ² (Department of Economics, Faculty of Administrative and Economic Sciences, Ferdowsi University, Mashhad, Iran.)
Massoud  Homayounifar ³ (Department of Economics, Faculty of Administrative and Economic Sciences, Ferdowsi University, Mashhad, Iran.)
S. Mohammad Qaim  Zabihi ⁴ (Department of Economics, Faculty of Administrative and Economic Sciences, Ferdowsi University, Mashhad, Iran)

Received: 2023-09-26 Accepted : 2023-11-27 Published : 2023-12-22

Keywords: Wavelet Transform, Tehran stock exchange index, H54, Quantile Regression, B23, Keywords: Oil Price Uncertainty, Garch. JEL Classification: E31,

Abstract :

Abstract Investigating the effect of oil price uncertainty on the Tehran Stock Exchange index is of great importance because with increasing uncertainty in oil prices, the systematic risk of the stock market index increases. On the other hand, in oil exporting countries such as Iran, oil revenues are among the most important and influential factors in macroeconomic variables and, consequently, financial market indicators. The present study investigates the effect of oil price uncertainty on the Tehran Stock Exchange index using the wavelet-based quantile regression model (MODWT-MRA) during the period April 2011 to April 2021 in Iran.. The results of the model estimate showed that with the increase in oil price uncertainty, the Tehran Stock Exchange index will decrease. According to the results, the effect of oil price uncertainty on the Tehran Stock Exchange index in the first few quantiles has a smaller coefficient than the final quantiles, so the negative effect of oil price uncertainty on the Tehran Stock Exchange index in recent months is more than the first months. Also, the coefficient value on the component 5 scale is much higher than the component 1 scale; Therefore, the negative effect of oil price uncertainty on the Tehran Stock Exchange index in the short run is much greater than the value of this effect in the long run. This is because in the long run, the investor will adjust to the uncertainty.

References:

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