Analyzing the Structural Breaks and the Exchange Market Turbulence on Volatility Spillovers Between Exchange Rates and Tehran Stock Exchange

Accepted Oct. 21, 2020 / Financial Knowledge of Securities Analysis

Posted: 25 Jan 2021

See all articles by Mohammadmehdi Gholizadeh

Mohammadmehdi Gholizadeh

Economic Affairs Research Institute

Alireza Erfani

affiliation not provided to SSRN

Date Written: November 15, 2020

Abstract

This article has studied several fluctuations in the Iranian currency market and multiple turmoils in the economy that have not only wiped out Iranians private savings but also affected financial market activists to provide a better understanding of fluctuations' movement between markets. To doing so, we used the exchange rate in the open market (in some periods, the black market) as one variable and the Tehran Stock Exchange Index (TEDPIX) as a second in the form of multivariate conditional heterogeneity variance (MGarch) model.

According to the results, the time series suggests multiple structural breaks from Dec. 2018 to Jan. 2020. Using the so-called GLS-Based unit root test, we observed five structural breaks that produced stationary problems at the level and no evidence of stationary problems at the return of the data. Also, by using DCC and FDCC models we confirm that there is a fluctuation between the two markets during the period. This overflow shows a different performance if structural failures are considered.

Keywords: Exchange Rate Turbulence, Volatility Spillover, Exchange Rate, Tehran Stock Exchange Performance, Multiple Structural Breaks

JEL Classification: G01, G11

Suggested Citation

Gholizadeh, Mohammadmehdi and Erfani, Alireza, Analyzing the Structural Breaks and the Exchange Market Turbulence on Volatility Spillovers Between Exchange Rates and Tehran Stock Exchange (November 15, 2020). Accepted Oct. 21, 2020 / Financial Knowledge of Securities Analysis, Available at SSRN: https://ssrn.com/abstract=3730886

Mohammadmehdi Gholizadeh (Contact Author)

Economic Affairs Research Institute ( email )

No. 9
3rd Avn., Vozara St.,
Tehran, Tehran
Iran

Alireza Erfani

affiliation not provided to SSRN

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