Measuring the Effect of Exchange Rate Uncertainty on Industrial Corporates Stock Price Index of Tehran Stock Exchange

Document Type : Scientific paper

Author

Department of Economics, Islamic Azad University, firoozkooh, Iran.

Abstract

One of the most important variables affecting stock price index is exchange rate and its fluctuations. The aim of this paper was to investigate the effect of nominal exchange rate uncertainty on the stock price of industrial corporates in Tehran stock exchange over the period 1378:1-1392:4. For this purpose Conditional Variance of nominal exchange rate was calculated by an Autoregressive Conditional Heteroskedasticity (ARCH) model and was considered as a proxy for Nominal Exchange rate uncertainty. By adopting an Auto Regressive Distributed Lag (ARDL) model and considering nominal exchange rate uncertainty with other variables such as nominal exchange rate, Real Gross domestic products, real liquidity, consumer price index and real price of energy as explanatory variables, the results indicated that nominal exchange rate uncertainty has significant negative effect on industrial corporate stock price index of Tehran stock exchange in both short and long term. Liquidity and the price of energy negatively and real gross domestic product, nominal exchange rate and consumer price index positively affect price index of industrial corporate of Tehran stock exchange and these effects are significant in the long run. Therefore implementing of suitable fiscal and monetary policies and preventing exchange rate fluctuations will decrease the uncertainty of nominal exchange rate will cause boom of stock price of industrial corporate and overall stock exchange market.

Keywords

References

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Macroeconomics Research Letter
Volume 11, Issue 22
January 2017
Pages 105-131

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History

  • Receive Date: 28 February 2017
  • Revise Date: 18 April 2017
  • Accept Date: 18 September 2017

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