Investigating the relationship between oil price and Iran's stock market index with an emphasis on political uncertainty and the Corona pandemic: Using wavelet transform approach

Subject Areas : Labor and Demographic Economics

nasim  amin kharazian ¹ (PhD student, Department of Economics, Tabriz Branch, Islamic Azad University, Tabriz, Iran)
roya  aleemran ² (Associate Professor Department of Economics,Tabriz Branch , Islamic Azad University, Tabriz, IRAN)
Rasoul  baradaran hassanzadeh ³ (Associate Professor, Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Iran)
Amir Ali  farhang ⁴ (Assistant Professor, Department of Economics, Payame Noor University, Tehran, Iran)

Received: 2022-08-14 Accepted : 2022-11-14 Published : 2022-09-21

Keywords: Oil Price, Total index of Tehran Stock Exchange, wavelet coherence, continuous wavelet,

Abstract :

The purpose of this research is to investigate the relationship between crude oil prices and the stock market index of Iran in the period from September 2009 to December 2020. For this purpose, by using wavelet coherence approach based on continuous wavelet transform, the relationship between the yield pair series of Brent crude oil price-total stock index, WTI oil price-total stock index and OPEC oil price-total index of Tehran Stock Exchange has been investigated .The results of this research show that the dependence between the above pair of time series increases with the increase of uncertain conditions such as the increase of sanctions, the withdrawal of the United States from the JCPOA, and the corona pandemic in the medium and long term. Therefore, investors can adjust their investment portfolio in the long and medium term based on the conditions governing the country and their investment goals.

References:

منابع

• شبان، مهدی، نخعی، حبیب­اله، طالب­نیا، قدرت­الله، بشیری‌منش، نازنین (1400). طراحی الگوی غیرخطی سرایت­پذیری شاخص کل بورس اوراق بهادار تهران از بازارهای دارایی­های فیزیکی (کاربردی از مدل شبکه عصبی مصنوعی NARX)، فصلنامه مهندسی مالی و مدیریت اوراق بهادار، (46): 494-476.


• فطرس، محمدحسین، هوشیدری، مریم (1396). بررسی میزان اثرگذیری نوسانات شاخص قیمت بورس اوراق بهادار تهران و دوبی از نوسانات قیمت جهانی نفت خام WTI، فصلنامه علمی پژوهشی مطالعات اقتصادیِ کاربردی ایران، 6 (22): 171-195.


• قنبریان، رضا، ثقفی، علی (1394). مطالعه تجربی رابطه پویای قیمت نفت و شاخص­های بازار سرمایه در ایران، تحقیقات مدل‌سازی اقتصادی، 5 (20): 216-193.


• مهدوی، ابوالقاسم، مهرآرا، محسن، معماریان، محمدحسین (1398). بررسی اثر تکانه­های قیمتی نفت بر نااطمینانی در بازارهای ارز، طلا و بورس اوراق بهادار در ایران، فصلنامه تحقیقات اقتصادی، 54 (3): 769-739.


• Aguiar-Conraria, L. & M. J. Soares (2014). The continuous wavelet transform: Moving beyond uni- and bivariate analysis, Journal of Economic Surveys, 28(2): 344–375.


• Arouri, M. E. H., & Nguyen, D. K. (2010). Oil prices, stock markets and portfolio investment: Evidence from sector analysis in Europe over the last decade. Energy policy, 38(8): 4528-4539.


• Aydoğan, B., Tunç, G., & Yelkenci, T. (2017). The impact of oil price volatility on net-oil exporter and importer countries’ stock markets. Eurasian Economic Review, 7(2): 231-253.


• Chen, N.-F., R. Roll & S. A. Ross (1986). Economic forces and the stock market, Journal of Business, 59(3): 383–403.


• El-Sharif, I., Brown, D., Burton, B., & Nixon, B. (2005). Evidence on the nature and extent of the relationship between oil prices and equity values in the UK, Energy Economics, 27(6):819-830.


• Hamilton, J. D. (1983). Oil and the macro economy since World War II. Journal of Political Economy, 91(2): 228–248.


• Hamilton, J. D. (2003). What is an oil shock? Journal of Econometrics, 113(2): 363–398.


• Huang, R. D., R. W. Masulis and H. R. Stoll (1996). Energy shocks and financial markets, Journal of Futures Markets, 16(1): 1–27.


• Jiang, Z., & Yoon, S. M. (2020). Dynamic co-movement between oil and stock markets in oil-importing and oil-exporting countries: Two types of wavelet analysis. Energy Economics, 90, 104835.


• Jones, C. M., & Kaul, G. (1996). Oil and the stock markets. The Journal of Finance, 51(2): 63–491.


• Kilian, L., & Park, C. (2009). The impact of oil price shocks on the U.S. stock market. International Economic Review, 50(4): 1267–1287.


• Lee, C.-C., & Zeng, J.-H. (2011).The impact of oil price shocks on stock market activities: Asymmetric effect with quintile regression. Mathematics and Computers in Simulation, 81(9): 1910–1920.


• Mollick, A. V., & Assefa, T. A. (2013). U.S. stock returns and oil prices: The tale from daily data and the 2008–2009 financial crisis. Energy Economics, 36: 1–18.


• Mugaloglu, E., Polat, A. Y., Tekin, H., & Dogan, A. (2021). Oil Price Shocks during the COVID-19 Pandemic: Evidence from United Kingdom Energy Stocks. Energy Research Letters, 2(1): 24253.


• Park, J., & Ratti, R. A. (2008). Oil price shocks and stock markets in the US and 13 European countries. Energy economics, 30(5): 2587-2608.


• Phan, D. H. B., Sharma, S. S., & Narayan, P. K. (2015). Oil price and stock returns of consumers and producers of crude oil. Journal of International Financial Markets, Institutions and Money, 34: 245–262.


• Prabheesh, K. P., Padhan, R., & Garg, B. (2020). COVID-19 and the oil price–stock market nexus: Evidence from net oil-importing countries. Energy Research Letters, 1(2), 13745.


• Sadorsky, P. (1999). Oil price shocks and stock market activity, Energy Economics, 21(5): 449–469.


• Torrence, C. and G. P. Compo (1998). A practical guide to wavelet analysis, Bulletin of the American Meteorological Society, 79(1): 61–78.


• Torrence, C. and P. J. Webster (1999). Interdecadal changes in the ENSO–Monsoon System, Journal of Climate, 12(8): 2679–2690.