The Responses of Stock, Gold and Foreign Exchange Markets to Financial Shocks: VAR-MGARCH Approach

Dehbashi, Vahid; Mohammadi, Teymour; Shakeri, Abbas; Bahrami, Javid

doi:10.22054/ijer.2020.44248.774

Document Type : Research Paper

Authors

¹ Ph.D. Student of Financial Economics, Allameh Tabataba’i University, Tehran, Iran.

² Associate Professor, Economics, Allameh Tabataba’i University, Tehran, Iran.

³ Professor, Economics, Allameh Tabataba’i University, Tehran, Iran.

⁴ Associate Professor, Economics, Allameh Tabataba’i University, Tehran, Iran

https://doi.org/10.22054/ijer.2020.44248.774

Abstract

The aim of this paper is to investigate the responses of stock, gold and foreign exchange markets in Iran, with an emphasis on the spillover volatility effects. For this purpose, the rate of return of variables is calculated by using the daily data of Tehran Stock Exchange price index, exchange rate and gold price during the period of 25 March 2009 to 18 July 2018. The estimated model investigates volatility spillovers in the markets using the VAR-BEKK-GARCH approach. The impulse-response functions are estimated by including the possibility of the asymmetry of the coefficients of the cross terms of the errors in MGARCH-type equations. The results show two-way volatility spillover between foreign exchange and stock markets, one-way volatility spillover from the foreign exchange to gold markets and one-way volatility spillover from the gold to stock markets. Moreover, the findings obtained from the impulse-response functions confirm the spread of uncertainty among the financial markets in Iran.

Keywords

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Iranian Journal of Economic Research

The Responses of Stock, Gold and Foreign Exchange Markets to Financial Shocks: VAR-MGARCH Approach

References

References

Volume 25, Issue 83 - Serial Number 83
July 2020
Pages 1-27

The Responses of Stock, Gold and Foreign Exchange Markets to Financial Shocks: VAR-MGARCH Approach

References

References

Volume 25, Issue 83 - Serial Number 83July 2020Pages 1-27

Volume 25, Issue 83 - Serial Number 83
July 2020
Pages 1-27