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The Impact of Oil Revenue Shocks on the Volatility of Iran s Stock Market Return

Author

Listed:
  • Sina Davoudi

    (MA in Financial Management, Management Department, Faculty of Economics, Management, and Business, University of Tabriz, Iran)

  • Alireza Fazlzadeh

    (Associate Professor, Management Department, Faculty of Economics, Management, and Business, University of Tabriz, Iran,)

  • Firouz Fallahi

    (Associate Professor, Management Department, Faculty of Economics, Management, and Business, University of Tabriz, Iran,)

  • Hossein Asgharpour

    (Associate Professor, Management Department, Faculty of Economics, Management, and Business, University of Tabriz, Iran.)

Abstract

The aim of this study was to examine the impact of oil revenue shocks on the volatility of Tehran s stock market return, by applying GARCH (Generalized Auto Regressive Conditional Heteroscedasticity) model with seasonal data from January 1993 to March 2014. After calculating the volatility stock returns via GARCH models, we employed ARDL (Auto Regressive Distributed Lag) model to estimate the oil shocks effects. The population is consisted of all active companies in Tehran s stock market during the period of this research. Study results showed that oil shocks are associated with positive effects on the stock market volatility, representing that this shocks are one of the main motivators of stock price index growth in Iran s case. More ever, exchange rate and liquidity had same effects on the stock market return through increasing the volatility. On the other hand our results indicated that there were no relations between consumer price index and stock market volatility. Other result of this study refers to effects of sanctions imposed by the US and Europe, which elicits the increase of stock market volatility from the day they have been taken place.

Suggested Citation

  • Sina Davoudi & Alireza Fazlzadeh & Firouz Fallahi & Hossein Asgharpour, 2018. "The Impact of Oil Revenue Shocks on the Volatility of Iran s Stock Market Return," International Journal of Energy Economics and Policy, Econjournals, vol. 8(2), pages 102-110.
    • Handle: RePEc:eco:journ2:2018-02-13
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    References listed on IDEAS

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    1. Bouri, Elie, 2015. "Return and volatility linkages between oil prices and the Lebanese stock market in crisis periods," Energy, Elsevier, vol. 89(C), pages 365-371.
    2. Arouri, Mohamed El Hedi & Jouini, Jamel & Nguyen, Duc Khuong, 2012. "On the impacts of oil price fluctuations on European equity markets: Volatility spillover and hedging effectiveness," Energy Economics, Elsevier, vol. 34(2), pages 611-617.
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    Cited by:

    1. Mishra, Shekhar & Mishra, Sibanjan, 2021. "Are Indian sectoral indices oil shock prone? An empirical evaluation," Resources Policy, Elsevier, vol. 70(C).
    2. Muhammad Kamran Khan & Jian‐Zhou Teng & Muhammad Imran Khan & Muhammad Fayaz Khan, 2023. "Stock market reaction to macroeconomic variables: An assessment with dynamic autoregressive distributed lag simulations," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2436-2448, July.
    3. Babak Fazelabdolabadi, 2019. "Uncertainty and energy-sector equity returns in Iran: a Bayesian and quasi-Monte Carlo time-varying analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-20, December.
    4. 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, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Oil revenue; stock market returns volatility; sanctions; exchange rate; consumer price index; portfolio management.;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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