Volume 19, Issue 2 (6-2024)
J. Mon. Ec. 2024, 19(2): 211-227 |
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behzadi soufiani M, shahbazi M. The Impact of Exchange Rate on Stock Price in Iran: A Quantile Regression Approach. J. Mon. Ec. 2024; 19 (2) : 4
URL: http://jme.mbri.ac.ir/article-1-682-en.html
URL: http://jme.mbri.ac.ir/article-1-682-en.html
1- university of Tehran
Abstract: (1124 Views)
Iranian stock market, as a reflection of the real sector of the country's economy, has experienced many uncertainties and challenges in recent years. One of the macroeconomic factors that vaguely affects stock market is exchange rate, which has a significant volatile pattern with several overshoots during recent years. As a result, analyzing the impact of the exchange rate on stock price has become important as always. Bearing the restrictions on Iran’s trade and spectacular role of exchange rate in Iranian economy along with monetary expansion and fiscal dominance in mind, stock market reacts to exchange rate fluctuations in an asymmetric way. In order to prevent the impact of outliers and parametrical failures, this study seeks to examine the impact of exchange rate fluctuations on the stock price using quantile regression. Based on daily data between 2020/10/12 till 2024/12/20 and using first difference of both stock price logarithm and exchange rate logarithm, it became vivid that the impact of the exchange rate on the stock price is different in estimated quantiles and it is U shaped. Meaning when Stock market is stable and there are no absolute pattern of growth or crash around the median, exchange rate could not explain the stock price significantly. However, if the stock market goes bearish or bullish, quantiles where market is on its lowest or in top two quantiles, exchange rate has a crucial positive impact on the market which complies with evidence in the sample period.
Article number: 4
Type of Study: Original Research - Empirical |
Subject:
Economics
Received: 7 Mar 2025 | Accepted: 25 May 2025 | Published: 29 Jun 2025
Received: 7 Mar 2025 | Accepted: 25 May 2025 | Published: 29 Jun 2025
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67. Krishnan, D., & Dagar, V. (2022). Exchange rate and stock markets during trade conflicts in the USA, China, and India. Global Journal of Emerging Market Economies, 14(2), 185-203. [DOI:10.1177/09749101221082724]
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70. Lotfalipour, M., & Karimi, N., (2019). Investigating the relationship between interest rates and exchange rates in the Iranian economy using meta-heuristic algorithms. Monetary and financial economics, 18(18), 73-94. doi: 10.22067/pm.v26i17.65430. [In Persian]
71. Maghsoudi, S. , Abdi Seyyedkolaee, M. , & Zaroki, S. (2023). Analysis of the Asymmetric Effect of Exchange Rate Gap on Economic Welfare in Iran. Macroeconomics Research Letter, 18(37), 33-61. doi: 10.22080/iejm.2023.26062.1996. [In Persian]
72. Mlambo, C., Maredza, A., & Sibanda, K., (2013). Effects of Exchange Rate Volatility on the Stock Market: A Case Study of South Africa. Mediterranean Journal of Social Sciences, 4(14). [DOI:10.5901/mjss.2013.v4n14p561]
73. Mohagheq Nia, M., Ziachi, A., Sargolzaei, M., & Khashai, V. (2022) Evaluating the effect of currency fluctuations on the performance of companies listed in the Tehran Stock Exchange and measuring its time intervals. Financial Economics, 16(59), 127-154. [In Persian]
74. Mohamed, O. A. S., & Elmahgop, F. O. M. (2020). Is the effect of the exchange rate on stock prices symmetric or asymmetric? Evidence from Sudan. International Journal of Economics and Financial Issues, 10(2), 209-215. [DOI:10.32479/ijefi.9268]
75. Mohamadi, E. , Barkhordari, S. and Mehrara, M. (2024). Investigating the Effect of Exchange Rate on Herd Behavior in Tehran Stock Exchange: Application of FAVAR Approach. Journal of Economic Research (Tahghighat- E- Eghtesadi), 59(1), 117-149. doi: 10.22059/jte.2024.96845. [In Persian]
76. Moore, T., & Wang, P. (2014). Dynamic linkage between real exchange rates and stock prices: Evidence from developed and emerging Asian markets. International Review of Economics and Finance. 29, 1-11. [DOI:10.1016/j.iref.2013.02.004]
77. Moussa, F., & Delhoumi, E. (2022). The asymmetric impact of interest and exchange rate on the stock market index: evidence from MENA region. International Journal of emerging markets, 17(10), 2510-2528. [DOI:10.1108/IJOEM-01-2020-0089]
78. Musai, M., Mehregan N., & Amiri H (2010). Stock Market and Macroeconomic Variables: a Case Study for Iran. Quarterly journal of Economic research and policies, 18 (54), 73-94.
79. Özbey, F. (2016, April). How do exchange rate movements affect stock prices? The case of Turkey. In Proceedings of International Academic Conferences (No. 3506112). International Institute of Social and Economic Sciences. [DOI:10.20472/IAC.2016.022.040]
80. Perera, H. A. P. K. (2016). Effects of exchange rate volatility on stock market return volatility: evidence from an emerging market. International Journal of Science and Research (IJSR), 5(1), 1750-1755. [DOI:10.21275/v5i1.NOV153206]
81. Rady, A., Essam, F., Yahia, H., & Shalaby, M. (2024). The Dynamic Relationship Between Exchange Rate Volatility and Stock Prices in the Egyptian Real Estate Market and the Moderating Effect of Interest Rates. European Journal of Business and Management Research, 9(5), 31-44. [DOI:10.24018/ejbmr.2024.9.5.2230]
82. Salisu, A. A., Isah, K., & Ogbonnaya‐Orji, N. (2022). A firm level analysis of asymmetric response of US stock returns to exchange rate movements. International Journal of Finance & Economics, 27(1), 1220-1239. [DOI:10.1002/ijfe.2210]
83. Singh, S. P. (2019). Exchange Rate and Stock Exchange Indices: An Empirical Study on BSE and NSE Indices. Management Insight, 15(2), 28-35. [DOI:10.21844/mijia.15.2.4]
84. taghavi, A. , pahlavani, M. , z, G. and bashiri, S. (2020). Investigating the Asymmetric Effects of Exchange Rate Fluctuations on Investment in Manufacturing and Mining: Approach NARDL. Journal of Iranian Economic Issues, 7(1), 31-52. doi: 10.30465/ce.2020.5850. [In Persian]
85. Thi Thanh Binh, N. (2021). What does vietnam gain when its currency depreciates?. Economies, 9(4), 185. [DOI:10.3390/economies9040185]
86. Tsai, I. C. (2012). The relationship between stock price index and exchange rate in Asian markets: A quantile regression approach. Journal of International Financial Markets, Institutions and Money, 22(3), 609-621. [DOI:10.1016/j.intfin.2012.04.005]
87. Weijermars, R., & Bocardo, A. B. (2016). Shareholder valuations of petroleum companies and oilfield services during the 2008 and 2014 oil price shocks. Journal of Finance and Accounting, 4(6), 367-377. [DOI:10.11648/j.jfa.20160406.17]
88. Yaser, A., Hasan, E. F., Ahmad, G., Matar, A., Mansour, Y., & Haddad, H. (2022). Investigating the influence of financial indicators on stock returns in the presence of the COVID-19 pandemic. Asian Economic and Financial Review, 12(10), 837-847. [DOI:10.55493/5002.v12i10.4623]
89. Zivkov D., Njegic, J., & Markelic, J. (2014). Exchange Rate Effect on Stock Returns- A Quantile Regression Approach. Industrija, 42(3). [DOI:10.5937/industrija42-5561]
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