The effect of global real economic activity index on Iran's stock index

Document Type : Research Paper

Authors

1 Masoumeh Dadgar, PhD student of development Economics,Corresponding Author, Department of economics, Faculty of social science and economics, Alzahra university

2 Vida Varahrami, Associate Professor, Department of economics, Faculty of economics and politics science, Shahid Beheshti university

3 , Associate Professor, Department of economics, Faculty of social science and economics, Alzahra university

10.30465/jnet.2022.42941.1948

Abstract

In the face of frequent stock market turbulences that lead to losses for investors, it is necessary to determine the factors that are able to predict the stock index as accurately as possible. These factors depend on economic, political, social, cultural, etc. conditions in each country. Therefore, this study examines the relationship between Iran's stock index and global economic activity. Therefore, Kilian's economic index is used as an index to estimate global economic activity. After the definition and calculation method of this index, in the rest of this article, it examines the effect of shocks on real economic activity on Iran's stock index. Therefore, by applying the structural vector autoregression estimation method (SVAR) during the time period from 2001:01 to 2018:03 and using instantaneous response functions and analysis of variance, the effect of the variable of global economic activity on Iran's stock index has been investigated. Also, the variables of oil price, global oil production and exchange rate have been used as auxiliary and effective variables on the stock index. The results of the instantaneous reaction functions show that in the short term, the shocks of real global economic activity have had a positive effect on the stock index from the beginning of the period to the end of the period, and in other words, the stock index has shown a positive reaction to the shock of this variable.

Keywords


پورعبادالهان کویچ, محسن ; اصغرپور, حسین ; ذوالقدر, حمید;. (1393). بررسی رابطه بین قیمت سهام و نرخ ارز در کشورهای صادرکننده نفت: رویکرد هم انباشتگی. دو فصلنامه سیاستگذاری پیشرفت اقتصادی دانشگاه الزهرا (س). doi: 10.22051/EDP.2015.2072
شیرین بخش, ش., بزازان, ف., & زارعی, م. (1394). اثر تکانه های قیمت نفت بر شاخص قیمت بازار سهام رهیافت SVAR. مدیریت دارایی و تامین مالی, 3(2), 15-32.
فکاری, ب. س., صبوحی, م., & شاهپوری, ا. (1397). بررسی آثار تغییرات قیمت نفت خام بر شاخص بورس اوراق بهادار تهران: کاربرد الگوی M-GARCH رهیافت BEKK. تحقیقات اقتصادی, 53(2), 387-407. doi: 10.22059/JTE.2017.221562.1007409
گل خندان, ابوالقاسم;. (1395). تأثیر تکانه‌های مثبت و منفی قیمت نفت بر شاخص قیمت سهام در ایران (آیا این اثرگذاری نامتقارن است؟). فصلنامه سیاست های مالی و اقتصادی, 4(15), 89-114.
ورهرامی, و.,دادگر, م. (1399). بررسی بر هم کنش بازارهای اقتصادی ایران با توجه به اثر کیفی پاندمی کرونا با رهیافت SVAR. فصلنامه سیاست های مالی و اقتصادی, 8(32), 7-45. بازیابی از http://qjfep.ir/article-1-1229-fa.html&sw
Adedokun, Adebayo ;. (2018). The effects of oil shocks on government expenditure and government revenue nexus in nigeria (with exogeneity restrictions). Future Business Journal. doi:https://doi.org/10.1016/j.fbj.2018.06.003
Al-Fayoumi, Nedal ;. (2009). Oil Prices and Stock Market Returns in Oil Importing Countries: The Case of Turkey, Tunisia and Jordan. European Journal of Economics, Finance and Administrative Sciences, 16(1), 84-98.
Al-hajj, Ekhlas ; Al-Mulali, Usama ; Solarin, Sakiru Adebola ;. (2018). Oil price shocks and stock returns nexus for Malaysia: Fresh evidence from nonlinear ARDL test. Energy Reports, 624-637. doi:https://doi.org/10.1016/j.egyr.2018.10.002
Aloui, Riadh; Aïssa, Mohamed SafouaneBen ;. (2016). Relationship between oil, stock prices and exchange rates: A vine copula based GARCH method. The North American Journal of Economics and Finance, 458-471. doi:https://doi.org/10.1016/j.najef.2016.05.002
Arou, Mohamed ElHedi ; Nguyen, Duc Khuong ;. (2010). Oil prices, stock markets and portfolio investment: Evidence from sector analysis in Europe over the last decade. Energy Policy, 38(8), 4528-4539. doi:https://doi.org/10.1016/j.enpol.2010.04.007
Baek, Jungho;. (2021). A new look at the oil price-exchange rate nexus: Asymmetric evidence from selected OPEC member countries. Economic Analysis and Policy, 70, 172-181. doi:https://doi.org/10.1016/j.eap.2021.02.008
Basher, Syed A.; Sadorsky, Perry;. (2006). Oil price risk and emerging stock markets. Global Finance Journal, 17(2), 224-251. doi:https://doi.org/10.1016/j.gfj.2006.04.001
Basher, Syed Abul; Haug, Alfred A.; Sadorsky, Perry;. (2012). Oil prices, exchange rates and emerging stock markets. Energy Economics, 34(1), 227-240. doi:https://doi.org/10.1016/j.eneco.2011.10.005
Beaulieu, J.Joseph ; A.Miron, Jeffrey;. (1993). Seasonal unit roots in aggregate U.S. data. Journal of Econometrics, 55(1-2), 305-328. doi:https://doi.org/10.1016/0304-4076(93)90018-Z
Beckmann, Joscha ; Czudaj, Robert L. ; Arora, Vipin ;. (2020). The relationship between oil prices and exchange rates: Revisiting theory and evidence. Energy Economics. doi:https://doi.org/10.1016/j.eneco.2020.104772
Bernanke, Ben ;. (2016). The Relationship Between Stocks and Oil Prices. Web blog post. Ben Bernanke's Blog.
Bjørnland, Hilde C. ;. (2008). Oil Price Shocks and Stock Market Booms in an Oil Exporting Country. Scottish Journal of Political Economy, 56, 232-254. doi: 10.1111/j.1467-9485.2009.00482.x
Chen, Shiu-Sheng; Chen, Hung-Chyn;. (2007). Oil prices and real exchange rates. Energy Economics, 29(3), 390-404. doi:https://doi.org/10.1016/j.eneco.2006.08.003
Chkir, Imed; Guesmi, Khaled; Brayek, Angham Ben; Naoui, Kamel;. (2020). Modelling the nonlinear relationship between oil prices, stock markets, and exchange rates in oil-exporting and oil-importing countries. Research in International Business and Finance, 54. doi:https://doi.org/10.1016/j.ribaf.2020.101274
Dabwor, D., Iorember, P. T., & Danjuma, S. Y. (2020). Stock market returns, globalization and economic growth in Nigeria: Evidence from volatility and cointegrating analyses. Wiley. doi:10.1002/pa.2393
Dabwor, Dalis T. ;. (2010). The Nigerian banking system and the challenges of financial intermediation in the twenty-first century. Jos Journal of Economics, 4(1), 94-109.
Demirer, Rıza ; Ferrer, Román ; Shahzad, Syed Jawad Hussain ;. (2020). Oil price shocks, global financial markets and their connectedness. Energy Economics. doi:https://doi.org/10.1016/j.eneco.2020.104771
Escobari, Diego ; Sharma, Shahil ;. (2020). Explaining the nonlinear response of stock markets to oil price shocks. Energy. doi:https://doi.org/10.1016/j.energy.2020.118778
Farid, S., Mohsan, T., & Jan, M. (2022). Do Islamic Stocks reinforce Real Economic Activity?Evidence from an Emerging Islamic Capital Market. Iranian Economic Review, 421-433. doi:10.22059/ier.2021.79382
Filis , George ; Degiannakis, Stavros; Floros, Christos;. (2011). Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries. International Review of Financial Analysis, 20(3), 152–164. doi:https://doi.org/10.1016/j.irfa.2011.02.014
fisher, irving ;. (1930). The Theory of Interest. New York: Macmillan.
Golub, Stephen ;. (1983). Oil Prices and Exchange Rates. Economic Journal, 93(371), 576-93.
Hamilton, J. (1996). This is what happened to the oil price-macroeconomyrelationship. Journal of Monetary Economics, 38(2), 215−220.
Hamilton, J. (2019). Measuring global economic activity. Applied econometrics. doi:https://doi.org/10.1002/jae.2740
He, Yanan ; Wang, Shouyang ; Lai, Kin Keung;. (2010). Global economic activity and crude oil prices: A cointegration analysis. Energy Economics, 868–876. doi:doi:10.1016/j.eneco.2009.12.005
Hylleberg, Svend ; Engle, Robert ; Granger, Clive ; Yoo, Byung Sam ;. (1990). Seasonal integration and cointegration. Journal of Econometrics, 44(1-2), 215-238.
Jiang, Zhuhua; Yoon, Seong-Min;. (2020). Dynamic co-movement between oil and stock markets in oil-importing and oil-exporting countries: Two types of wavelet analysis. Energy Economics, 90. doi:https://doi.org/10.1016/j.eneco.2020.104835
Jiménez-Rodríguez, Rebeca ; Sánchez, Marcelo ;. (2005). Oil Price Shocks and Real GDP Growth: Empirical Evidence for some OECD Countries. Applied Economics, 37(2), 201-228. doi:10.1080/0003684042000281561
John Burr, Williams;. (1938). The theory of investment value. Cambridge: Harvard University.
Kilian , Lutz; Park, Cheolbeom ;. (2009). The Impact of Oil Price Shocks on the US Stock Market. International Economic Review, 50(4), 1267-1287. doi:https://doi.org/10.1111/j.1468-2354.2009.00568.x
Kilian, Lutz ;. (2008). Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy? The Review of Economics and Statistics, 216–240. doi:https://doi.org/10.1162/rest.90.2.216
Kilian, Lutz ; Hicks, Bruce ;. (2009). Did Unexpectedly Strong Economic Growth Cause the Oil Price Shock of 2003–2008? Journal of Forecasting, 32(5), 385-394. doi:https://doi.org/10.1002/for.2243
Köse, N., & Ünal, E. (2019). The Impact of Oil Price Shocks on Stock Exchanges in Caspian Basin Countries. Energy. doi:https://doi.org/10.1016/j.energy.2019.116383
Kumar, Satish ;. (2018). Asymmetric impact of oil prices on exchange rate and stock prices. The Quarterly Review of Economics and Finance. doi:https://doi.org/10.1016/j.qref.2018.12.009
Lee, K., Ni, S., & Ratti, R. (1995). Oil Shocks and the Macroeconomy: The Role of Price Variability. The Energy Journal, 39-56.
Mensah, Lord ; Obi, Pat ; Bokpin, Godfred ;. (2017). Cointegration Test of Oil price and US Dollar Exchange Rates for some Oil Dependent Economies. Research in International Business and Finance, 42, 304-311. doi:https://doi.org/10.1016/j.ribaf.2017.07.141
Mensi, Walid; Hammoudeh, Shawkat; Shahzad, Syed Jawad Hussain; Shahbaz, Muhammad;. (2017). Modeling systemic risk and dependence structure between oil and stock markets using a variational mode decomposition-based copula method. Journal of Banking & Finance, 75, 258-279. doi:https://doi.org/10.1016/j.jbankfin.2016.11.017
Mokni, Khaled ;. (2020). Time-varying effect of oil price shocks on the stock market returns: Evidence from oil-importing and oil-exporting countries. Energy Reports, 605–619. doi:https://doi.org/10.1016/j.egyr.2020.03.002
Mokni, Khaled ; Youssef, Manel ;. (2019). Measuring persistence of dependence between crude oil prices and GCC stock markets: A copula approach. The Quarterly Review of Economics and Finance, 72, 14-33. doi:https://doi.org/10.1016/j.qref.2019.03.003
Najaf, Rabia ;. (2016). Impact of International Oil Prices on the Stock Exchange of Malaysia and Turkey. Journal of Accounting & Marketing. doi:10.4172/2168-9601.1000204
Nasir, Muhammad Ali; Al-Emadi, Ahmed Abdulsalam; Shahbaz, Muhammad ;. (2019). Importance of oil shocks and the GCC macroeconomy: A structural VAR analysis. Resources Policy, 166-179. doi:https://doi.org/10.1016/j.resourpol.2019.01.019
Olayeni, Olaolu Richard ; Tiwari, Aviral Kumar ; Wohar, Mark E. ;. (2020). Global economic activity, crude oil price and production, stock market behaviour and the Nigeria-US exchange rate. Energy Economics. doi:https://doi.org/10.1016/j.eneco.2020.104938
Riman, H., Esso, I., & Eyo, E. (2008). Economic growth in Nigeria, a causality investigation. Global Journal of Social Sciences, 7(2), 88-91.
Sadorsky, Perry;. (1999). Oil price shocks and stock market activity. Energy Economics, 21(5), 449−469.
Shahrestani, Parnia; Rafei, Meysam;. (2020). The impact of oil price shocks on Tehran Stock Exchange returns: Application of the Markov switching vector autoregressive models. Resources Policy. doi:https://doi.org/10.1016/j.resourpol.2020.101579
Thorbecke, Willem ;. (2019). Oil prices and the U.S. economy: Evidence from the stock market. Journal of Macroeconomics. doi:https://doi.org/10.1016/j.jmacro.2019.103137
Tian, Meiyu; Li, Wanyang; Wen, Fenghua;. (2021). The dynamic impact of oil price shocks on the stock market and the USD/RMB exchange rate: Evidence from implied volatility indices. The North American Journal of Economics and Finance, 55. doi:https://doi.org/10.1016/j.najef.2020.101310
Turhan, M. Ibrahim; Sensoy, Ahmet; Hacihasanoglu, Erk;. (2014). A comparative analysis of the dynamic relationship between oil prices and exchange rates. Journal of International Financial Markets, Institutions and Money, 397-414. doi:https://doi.org/10.1016/j.intfin.2014.07.003
Wei, Yanfeng ; Guo, Xiaoying ;. (2017). Oil price shocks and China's stock market. Energy, 185-197. doi:https://doi.org/10.1016/j.energy.2017.07.137
Wen, Danyan ; Liu, Li; Ma, Chaoqun ; Wang, Yudong ;. (2020). Extreme risk spillovers between crude oil prices and the U.S. exchange rate: Evidence from oil-exporting and oil-importing countries. Energy. doi:https://doi.org/10.1016/j.energy.2020.118740
Xiao, Jihong ; Zhou, Min ; Wen, Fengming ; Wen, Fenghua ;. (2018). Asymmetric impacts of oil price uncertainty on Chinese stock returns under different market conditions: Evidence from oil volatility index. Energy Economics. doi:10.1016/j.eneco.2018.07.026
Xu, Yang; Han, Liyan; Wan, Li; Yin, Libo;. (2019). Dynamic link between oil prices and exchange rates: A non-linear approach. Energy Economics. doi:https://doi.org/10.1016/j.eneco.2019.104488
You, Wanhai; Guo, Yawei; Zhu, Huiming; Tang, Yong;. (2017). Oil price shocks, economic policy uncertainty and industry stock returns in China: Asymmetric effects with quantile regression. Energy Economics, 68, 1-18. doi:https://doi.org/10.1016/j.eneco.2017.09.007