Investigating the Effects of Contagion Between Monetary and Financial Markets of Iran

Document Type : Original Article

Authors

1 Ph.D Candidate in Financial Management, Department of Management, Faculty of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran,

2 Professor of Management, Department of Management, Faculty of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran

3 Associate Professor of Management, Department of Management, Faculty Member of Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran

Abstract

The occurrence of shocks in monetary and financial markets causes turbulence and disrupt relations among markets in particular the relation between risk and return of capital assets. Either, the dynamic correlation that exists among markets makes the effect of shocks contagions from one market to other markets. In this study, we investigate the effect of contagion among the monetary and financial markets of Iran using analysis of multivariate dynamic correlation among “conditional dynamic” variance and averages of daily market returns that were obtained by FIAPARCH model during 2007-2018 and using the Kargolok algorithm to identify structural breaking point in time series of market returns. The results indicate that the domestic political events have no effect on the occurrence of market shocks and the existence of the effect of contagion among those market. Also, we found that investors show heard behavior during and after turbulence period and when the turmoil ends and stability returns to the market, according to learning and changes that occurred in their utilities due to events and their new attitudes towards risks and returns, will change their investment behavior. 

Keywords

References

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Journal of Economics and Modelling
Volume 12, Issue 2 - Serial Number 46
September 2021
Pages 123-166

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