Threshold dynamics and asymmetric adjustment of stock and currency markets returns in Iran

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abtahi sayed yahya; Khajehmahmoodabadi Hamid

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Journal: INVESTMENT KNOWLEDGE Year:2020 | Volume:9 | Issue:34 Page(s): 149-165

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Information Journal Paper

Title

Threshold dynamics and asymmetric adjustment of stock and currency markets returns in Iran

Author(s)

abtahi sayed yahya | Khajehmahmoodabadi Hamid | Issue Writer Certificate

Keywords

Threshold dynamicsQ1

asymmetric adjustmentQ1

market returnsQ1

Abstract

Identifying the behavior of prices in financial markets requires attention to the dynamics in the process of adjustment to long-term equilibrium in these markets and attention to this issue is necessary for policy makers of the capital market due to fluctuations of the foreign exchange market in Iran. In this paper, the asymmetric adjustment and dynamic behavior of foreign exchange and stock markets are studied. The results of Threshod vector autoregression and Threshold cointegration models on the relations between these markets indicate that the returns of stock and currency markets are cointegrated with a threshold adjustment, and the process of adjustment when stock and currency markets are adjusted to long-term equilibrium are asymmetric. Also, there is a much lower convergence of positive deviations (above the threshold) of long-term equilibrium with negative deviations (lower thresholds), and the deviation of the return on long-term equilibrium in the stock market in negative errors is adjusted to a higher rate than positive errors. And this adjustment is quite asymmetric and meaningful.

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APA: Copy

abtahi, sayed yahya, & Khajehmahmoodabadi, Hamid. (2020). Threshold dynamics and asymmetric adjustment of stock and currency markets returns in Iran. INVESTMENT KNOWLEDGE, 9(34 ), 149-165. SID. https://sid.ir/paper/390097/en

Vancouver: Copy

abtahi sayed yahya, Khajehmahmoodabadi Hamid. Threshold dynamics and asymmetric adjustment of stock and currency markets returns in Iran. INVESTMENT KNOWLEDGE[Internet]. 2020;9(34 ):149-165. Available from: https://sid.ir/paper/390097/en

IEEE: Copy

sayed yahya abtahi, and Hamid Khajehmahmoodabadi, “Threshold dynamics and asymmetric adjustment of stock and currency markets returns in Iran,” INVESTMENT KNOWLEDGE, vol. 9, no. 34 , pp. 149–165, 2020, [Online]. Available: https://sid.ir/paper/390097/en

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