Investigating the short and long term relationship between upside and downside risks with inflation and economic growth

Subject Areas : Financial engineering

Hossein Rad kaftroudi ¹ , mohammadhasan gholizadeh ² , mahdi fadaei Eshkiki ³

1 - Department of Financial Management, Rudbar Branch, Islamic Azad University, Rudbar , Iran
2 - Department of Management, Faculty of Literature and Humanities sciences, University of Guilan, Rasht, Iran
3 - Department of Management, Rasht Branch, Islamic Azad University, Rasht, Iran

Received: 2021-11-16 Accepted : 2022-01-03 Published : 2022-09-23

Keywords: Economic Growth, inflation, upside and downside risks, panel ARDL model,

Abstract :

since so far few studies have been conducted in the field of relationship favorable and unfavorable risk management with macroeconomic variables, in the present study, the short and long term effects of inflation and economic growth on the upside and downside risk management of cement and pharmaceutical companies in the Iranian Stock Exchange in the form of ARDL panel model during the period 1391-99 were studied. The statistical population of the present study includes cement and pharmaceutical companies Iranian Stock Exchange, which selected 62 companies as a statistical sample using the systematic elimination method. The results showed that the inflation has a positive effect on the the upside and downside risks of cement and pharmaceutical companies, but economic growth has a negative effect on this variable. The results of the error correction model (ECM) indicate that 50.6% of the imbalance of upside and downside risks variable of its long-term values disappears after a period. Based on this, it can be said that if a shock causes favorable and unfavorable risks in market, it takes about two periods for the market to return to its original long-term equilibrium.