Asymmetric Effect of Exchange Rate Fluctuations on Stock Return in the Iranian Stock Market

Subject Areas : Computational economics

Mohammadreza Nahidi Amirkhiz ¹ (Assistant Professor, Department of Economics, Tabriz Branch, Islamic Azad University, Tabriz, Iran)

Received: 2022-07-05 Accepted : 2022-07-05 Published : 2022-05-22

Keywords: Exchange rate fluctuation, Dividend Index, Asymmetric Effect, Economics Model of Variance Heterogeneity Models (EGARCH),

Abstract :

In this paper, the asymmetric effect of exchange rate fluctuations on the stock return in the Iranian stock market was investigated. Using a graph model, exchange rate fluctuations are measured and then, stock return is estimated by considering these fluctuations for the period between 1979 and 2021. The results of this study indicated that exchange rate fluctuations have a significantly positive effect on the stock return. In addition, this study tested the effect of fluctuations between the foreign exchange market and the stock market. Due to the low degree of simultaneous fluctuations between these two markets, investors can reduce their investment risk by allocating their capital between currency and stocks.