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Reinvestigation of Oil Price-Stock Market Nexus in Iran: A SVAR Approach

Author

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  • Eisa Maboudian

    (Department of Economics, Islamic Azad University, Central Tehran Branch, Iran.)

  • Khashayar Seyyed Shokri

    (Department of Economics, Islamic Azad University, Central Tehran Branch, Iran.)

Abstract

In this paper we investigate the effect of oil price shocks on stock market index in Iran, by using of a structural VAR (SVAR) approach. We used four variables in the model namely Kilian index, global oil supply, real oil price and real stock market index. The data are monthly and spanning the period 1997M10-2014M12. We identify the effect of four different shocks on stock market including oil supply shock, aggregate demand shock, other oil-specific shock and other stockspecific shock. Empirical evidences from impulse response functions (IRFs) indicate that oil supply shock is not significant, and the impact of other three shocks persists for about 3, 6 and 2 months respectively. Variance decomposition (VD) of stock market index indicates “other stock-specific shock” is the most important explainer of its variations. These findings are consistent with the findings of other oil-exporting countries including Saudi Arabia, Kuwait, Mexico, Norway, Russia, Venezuela and Canada except the effect of oil supply shock in variance decomposition of stock market index.

Suggested Citation

  • Eisa Maboudian & Khashayar Seyyed Shokri, 2015. "Reinvestigation of Oil Price-Stock Market Nexus in Iran: A SVAR Approach," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 19(1), pages 81-90, Winter.
    • Handle: RePEc:eut:journl:v:19:y:2015:i:1:p:81
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    References listed on IDEAS

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    Cited by:

    1. Saeed Shavvalpour & Hossein Khanjarpanah & Farhad Zamani & Armin Jabbarzadeh, 2017. "Petrochemical Products Market and Stock Market Returns: Empirical Evidence from Tehran Stock Exchange," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(2), pages 383-403, Spring.

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