THE EFFECT OF OIL PRICE VOLATILITY ON THE STOCK RETURN INDEX IN TEHRAN STOCK EXCHANGE

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KHATIB SEMNANI MOHAMMAD ALI; SHOJAEE MASOOMEH; GHIASI KHOSROSHAHI MASUD

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Journal: Financial Economics Year:2014 | Volume:8 | Issue:29 Page(s): 89-113

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Title

THE EFFECT OF OIL PRICE VOLATILITY ON THE STOCK RETURN INDEX IN TEHRAN STOCK EXCHANGE

Author(s)

KHATIB SEMNANI MOHAMMAD ALI | SHOJAEE MASOOMEH | GHIASI KHOSROSHAHI MASUD | Issue Writer Certificate

Keywords

OIL PRICEQ2

STOCK RETURN INDEXQ2

VECMQ2

EGARCHQ2

Abstract

In this study, the effects of the crude OIL PRICE fluctuations have been examined on the Tehran's STOCK RETURN INDEX. The data used in this study are weekly time series from the first week of second month in 1380 to the fourth week of fourth month in 1390. For this purpose, firstly the price fluctuations of Iran's heavy crude oil have been modeled using EGARCH model. Then, the short term and long-term effects of Iran's heavy crude oil have been examined on the Tehran's STOCK RETURN INDEX using VECM model. The results of this study indicate that there is no significant and positive relationship between Iran's heavy crude oil and Tehran's STOCK RETURN INDEX in long terms and short-terms. On the other hand, based on the model results, there is a reverse long term relationship between the mentioned variables. As a matter of fact, according to the long-term relationship resulted from the VECM model, Tehran's STOCK RETURN INDEX decreases due to the increase of the Iran's heavy crude oil. Moreover, price elasticity of Tehran's stock return has been 9.54 % to the crude OIL PRICE fluctuations. Therefore, if the crude OIL PRICE fluctuations increase one percent, Tehran's STOCK RETURN INDEX will decrease 9.54% in long-term. As a conclusion, convergence between Tehran's STOCK RETURN INDEX and Iran's heavy crude oil has been confirmed and the obtained ECT (-1) coefficient illustrates if a short-term shock from the Iran's heavy crude oil gets into the Tehran's STOCK RETURN INDEX, 36% from the effect of this shock will decrease in return path to the long-term equilibrium in each period. Consequently, Tehran's STOCK RETURN INDEX will reach to the long-term equilibrium after approximately three periods.

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APA: Copy

KHATIB SEMNANI, MOHAMMAD ALI, SHOJAEE, MASOOMEH, & GHIASI KHOSROSHAHI, MASUD. (2014). THE EFFECT OF OIL PRICE VOLATILITY ON THE STOCK RETURN INDEX IN TEHRAN STOCK EXCHANGE. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), 8(29), 89-113. SID. https://sid.ir/paper/229025/en

Vancouver: Copy

KHATIB SEMNANI MOHAMMAD ALI, SHOJAEE MASOOMEH, GHIASI KHOSROSHAHI MASUD. THE EFFECT OF OIL PRICE VOLATILITY ON THE STOCK RETURN INDEX IN TEHRAN STOCK EXCHANGE. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT)[Internet]. 2014;8(29):89-113. Available from: https://sid.ir/paper/229025/en

IEEE: Copy

MOHAMMAD ALI KHATIB SEMNANI, MASOOMEH SHOJAEE, and MASUD GHIASI KHOSROSHAHI, “THE EFFECT OF OIL PRICE VOLATILITY ON THE STOCK RETURN INDEX IN TEHRAN STOCK EXCHANGE,” JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), vol. 8, no. 29, pp. 89–113, 2014, [Online]. Available: https://sid.ir/paper/229025/en

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