Financial Economics
Reza Taleblou; Parisa Mohajeri; Abbas Shakeri; teymoor mohammadi; zahra zabihi
Abstract
Achieving the correct insight into the structure of connectedness and the spillover of volatilities between different stock exchange industries plays an important role in risk management and forming an optimal stock portfolio. Also, the analysis of inter-sectoral connectedness helps policy makers in ...
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Achieving the correct insight into the structure of connectedness and the spillover of volatilities between different stock exchange industries plays an important role in risk management and forming an optimal stock portfolio. Also, the analysis of inter-sectoral connectedness helps policy makers in designing policies that stimulate economic growth and implementing preventive measures to curb the propagation of systemic risk. In this regard, this article tries to use the data of 3370 trading days during the period of 1388/07/01 to 1402/06/31, encompassing 20 stock market industries (which constitute more than 80% of the Iranian stock market) and applying the connectedness approach based on the vector autoregression model with time-varying parameters (TVP-VAR), to estimate the systemic risk and volatility connectedness of the stock market network. In addition, we implement the minimum connectedness approach in the optimal stock portfolio and compared its performance with two other conventional approaches. The findings reveal that, first; the systemic risk in Iranian stock market is significant and has reached unprecedented figures of 80% in the last three years. Second, the four major export industries (petrochemicals, metals, mining and refining) experience the strongest pairwise connectedness, and among them, base metals appear as one of the most important transmitters of volatilities to the entire stock network. Thirdly, the stock portfolio based on the minimum connectedness method, compared to the minimum variance and minimum correlation methods, shows a better performance based on the criteria of cumulative return and hedge ratio efficiency.
International economy
Fakhri Mirshojaee; Nasser Elahi; Mohsen Seighali
Abstract
An important subject in the field of global economy is the financial crisis contagion on various markets. Given the expansion of trade relationships among different countries, proving the existence of contagion will facilitate policymaking in times of crisis. The present article tries to find the answer ...
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An important subject in the field of global economy is the financial crisis contagion on various markets. Given the expansion of trade relationships among different countries, proving the existence of contagion will facilitate policymaking in times of crisis. The present article tries to find the answer to the question of whether the Iranian foreign exchange market is affected by certain global crises. The answer may initially seem to be obvious; nevertheless, the channels of contagion or its share in market fluctuations cannot be confirmed if the existence of the phenomenon is not proved at first place. This study reviews the contagion effects of financial crises in selected crisis-stricken countries and those of oil and gold markets on Iran's free foreign exchange market, covering four crises including the US stock market crash, the Mexican financial crisis, SAARC, and the US subprime mortgage crisis during 1987-2008. For each crisis, stability periods were identified and using daily data and the Copula-GARCH model, the existence of contagion effects was studied. Findings indicated the contagion effects of the crises in the mentioned markets on the foreign exchange market. This was specifically witnessed in the case of the 2008 crisis with effects larger than others, manifesting themselves in the foreign exchange as well as the oil and gold markets. Therefore, part of the fluctuations in the market may be attributed to external factors, requiring the policymaker to avoid any intervention during global financial crisis or turbulence in the oil and gold markets.
Naser Khiabani; ehsan mohammadian nikpey
Abstract
This study examines the impact of a negative shock-attributed to a systemic risk-on the industrial indexes of the Tehran stock market using daily data form 21 January, 2008 to 22 September, 2017. Using a Vector Autoregressive for Value at Risk (VAR-VaR) and a quantile Impulse-response function that was ...
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This study examines the impact of a negative shock-attributed to a systemic risk-on the industrial indexes of the Tehran stock market using daily data form 21 January, 2008 to 22 September, 2017. Using a Vector Autoregressive for Value at Risk (VAR-VaR) and a quantile Impulse-response function that was newly proposed by White et al 2015, we focus on the tail interdependence between industrial index returns (financial institutions) and the market shock index and show how each industrial stock risks contemporaneously and dynamically response to systemic market shocks. Our finding show that there is a significant volatility spillover from a systemic shock to financial institutions in Tehran stock market. However as expected the magnitude of its impact is not the same for all industrial index risks. For examples, the impact of its shock on the bank and metal industrial volatilities is more sizable compared to its impact on the others. And finally, the stock market index has a strong and persistence tail dependency with the chemical and petroleum product industries.
