Calculation of Financial Stress Index and its Effect on the Return of Investment Funds in Islamic Capital Market: Application of the dynamic least squares co-accumulation method

Subject Areas : Economic and financial markets

farjad bakhshor ¹ , Mohammad Sokhanvar ² , tahereh akhoondzadeh ³ , Shahab jahangiri ⁴

1 - PhD Student, Department of Economics, Urmia Branch, Islamic Azad University, Urmia, Iran
2 - گروه اقتصاد، دانشکده اقتصاد، دانشگاه آزاد واحد ارومیه
3 - Assistant Professor, Department of Economics, Urmia Branch, Islamic Azad University, Urmia, Iran
4 - Assistant Prof. of Financial Economics, Faculty of Economic and Management, Urmia University, Urmia, Iran

Received: 2023-03-29 Accepted : 2023-05-22 Published : 2024-09-22

Keywords: principal component analysis, Financial Stress Index, dynamic ordinary least squares, stock investment fund,

Abstract :

Objective/main question: In this study, the effects of financial stress events on the returns of investment funds in the shares of the Islamic capital market of Iran during the period of 1390-1400 were investigated using monthly data and the econometric model.Research method: For this purpose, after calculating the financial stress in the studied financial markets (currency, capital and money market), these indicators were combined using the Principal Component Analysis (PCA) Method and the Total Financial Stress Index ( FSI) was Calculated for Iran's Economy. Subsequently, Dynamic Ordinary Least Squares (DOLS) Method was used to investigate the effect of financial stress on mutual investment fund returns in the Islamic capital market.Discussion and conclusion: The research results show that in the estimated model, with an increase of one unit in the financial stress index, the yield of investment funds decreases by 0.02 units.