Investigation the Spillover of Volatility and Return Between Cross-Border Markets (Forex and Cryptocurrencies) and Stock Market in Iran

Document Type : Original Article

Authors

1 Associate professor of Economics at the University of Mazandaran

2 MA student of economic at university of Mazandaran

10.48308/jem.2024.234768.1896

Abstract

The expansion of technology and the increasing development of global financial markets have transformed cross-border markets (Forex and cryptocurrencies) into one of the preferred markets for investors and traders in Iran. Given the growing interest of investors and traders in cross-border markets, this study examines the relationship between these markets and the stock market, as well as the spillovers of volatility and return among them in Iran during the period from February 2019 to March 2023 using daily data and the DCC-AR (1)-EGARCH (1,1) method. The results of this study indicate that Forex, cryptocurrencies, and the Tehran Stock Exchange (TSE) markets are symmetric, sensitive to crises, and affected by negative news, while the currency market (US dollar) is asymmetric and influenced by positive news. The results indicate that Forex, cryptocurrencies, and currency markets have a correlation with the Tehran stock exchange (TSE) market, suggesting that the growth of one market leads to the growth of another. The results of investigating spillovers of return and volatility between markets under study based on the Diebold & Yilmaz and Barunik & Krehlik indices indicate that there is a spillover of return and volatility from the Forex, cryptocurrency, and currency markets to the Tehran stock exchange market during the period under study. The Tehran stock exchange market is the largest return and volatility spillover recipient, while the cryptocurrency market is the smallest recipient of volatility spillover.

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