Maryam Bazraei; Salleh Ghavidel; Ghodratollah Emamverdi; Mahmoud Mahmoudzadeh
Abstract
In this study, we examine the correlation between stock returns of Export-oriented (EOIs) and Import-oriented (IOIs) industries and exchange rates, to derive stock-exchange optimal weights, attempting to manage the risk of investors in the capital market. To do so, the ADCC and DCC models are used. The ...
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In this study, we examine the correlation between stock returns of Export-oriented (EOIs) and Import-oriented (IOIs) industries and exchange rates, to derive stock-exchange optimal weights, attempting to manage the risk of investors in the capital market. To do so, the ADCC and DCC models are used. The data consists of the stock return of the listed industries, and the daily exchange rate from 2008 to 2020. The results suggest that EOIs have a dynamic asymmetric conditional correlation, and IOIs have a dynamic symmetric conditional correlation with the exchange rate. Moreover, the results indicate that in both currency crises, the weight of optimal portfolio in all industries except pharmaceuticals, in non-crisis period is over 50% and in the crisis period is less than 50%. Accordingly, and to reduce the risk of the portfolio, in the non-crisis period, investors should invest more than half of a one-Rial portfolio to dollar exchange, and in the crisis period, they should allocate less than half of a one-Rial portfolio to this currency. In case of the currency crisis, it is suggested that investors invest in the stock of basic metals, because this industry is a pioneer in attracting currency crisis and increasing stock value of the industry through future cash flow and replacement value, and reduce the stock of pharmaceuticals and computers in their portfolio, due to attracting negative effects of the exchange market.
Shahram Molavi Bisetoni; Kiamars Fathi Hafshejani; Aboutorab Alirezaei; Ghanbar Abbaspour Esfadan
Abstract
The primary purpose of this study is twofold: Firstly, using the Markov Regime Switching model throughout December 2008 to February 2020, it investigates and compares the nonlinear impacts of exchange rate movements and monetary policies on Petroleum Stock Index, PSI, in Iran. Accordingly, some control ...
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The primary purpose of this study is twofold: Firstly, using the Markov Regime Switching model throughout December 2008 to February 2020, it investigates and compares the nonlinear impacts of exchange rate movements and monetary policies on Petroleum Stock Index, PSI, in Iran. Accordingly, some control variables, such as OPEC oil price, inflation rate, and international sanctions, have also been used to model these relationships more accurately. Secondly, it is an empirical attempt to trace the historical changes in the PSI behavior through distinguishing the precise regime numbers, and the relationships between the exogenous variables and the PSI. Our results confirm that the effects of both exchange rate movements and monetary policies on the petroleum stock market return are direct and significant. More interestingly, the more we move from regime one to regime three, the greater the effects of the research variables on the index, except for the impact of OPEC oil prices. Our empirical findings further suggest as the effects of sanctions intensify, the influences of monetary policy and exchange rate movements would have a more significant impact on the petroleum stock index returns.