Comovement of Stock Market, Foreign Exchange and Gold in Iran: An Analysis of Econophysics

Subject Areas : Financial engineering

Younes Nademi ¹ , Ramin khochiany ²

1 - Assistant Professor of Economics, University of Ayatollah Boroujerdi
2 - Assistant Professor of Economics, University of Ayatollah Boroujerdi

Received: 2016-10-09 Accepted : 2016-12-15 Published : 2017-06-22

Keywords: Stock, gold, Comovement, Wavelet Coherency, Foreign Exchange, Econophysics,

Abstract :

This paper is trying to investigate comovement of the stock market, foreign exchange and gold in Iran. For this purpose, comovement and relationship mutually of these markets in Iran’s economy during the period 30.09.1997- 21.07.2015 with the weekly frequency have been investigated by the wavelet coherence analysis and Econophysics approach. The results of coherence analysis show that in the short time horizon during 2005-2008 and medium-term horizons during 2003-2006, the relationship between stock return and the exchange rate has been in the opposite direction (opposite phase). But in the longer-term horizonsduring2007-2010, the stock return moves after the moving exchange rate that the stock return is a lagging variable. Also, the coherence between gold and the exchange rate in the short term during1998-2002 was high with the same phase. After these years and during 2002-2012, the correlation between gold and the exchange rate had not been high particularly at high long-term horizons but after the year of 2012 with the intensification of sanctions, the coherency of these two markets has been high with the same phase until the year of 2014. Moreover, the coherency between stock return and the gold coin rates show that the intensity of correlation between these two variables during the period of study was low but the correlation of these two variables in 16-64 weeks’ horizons during 2001-2004 was high that of course, the direction of this relationship has been reversed.