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The Impacts of Industrial Index, Financial Index and Macroeconomic Variables on Tehran Stock Exchange: Markov-Switching Approach

Author

Listed:
  • Fegheh Majidi, Ali

    (Assistant Professor of Economics and Researcher at Kurdistan Studies Institute of the University of Kurdistan)

  • Shahidi, Fariba

    (M.A. in Economics, University of Kurdistan)

Abstract

The purpose of this study is the investigation of effective parameters on total Tehran stock exchange index such as industrial index, financial index, M2, Real interest rate and inflation rate, during 2009/8 until 2017/3 based on Central Bank database by using Markov switching approach. Considering the estimation and evaluation of different Markov switching models, Markov switching autoregressive parameters (MSA (3)) model is selected. The results show that real interest rate and inflation with two negative lag have a positive and significant effect on the total stock index. The industrial index and financial index in all three regimes have a positive and significant effect on the total index. The most effective factors are industry index in regime 2 and financial index in regime 0, respectively. Also, industry index in all three regimes has a higher impact on the overall index than the financial index. Moreover, the results of sustainability of regime show that sustainability in regime 1 is more than the other two regimes.

Suggested Citation

  • Fegheh Majidi, Ali & Shahidi, Fariba, 2018. "The Impacts of Industrial Index, Financial Index and Macroeconomic Variables on Tehran Stock Exchange: Markov-Switching Approach," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 5(2), pages 1-26, August.
    • Handle: RePEc:ris:qjatoe:0106
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    More about this item

    Keywords

    Industrial index; Financial index; Macroeconomic variables; Markov switching model; Stock price index;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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