Journal of Economics and Modelling

Journal of Economics and Modelling

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

Document Type : Original Article

Authors
Majid Aghaei 1
Mahdieh Rezagholizadeh 1
Samira Chawshany 2
1 Associate Professor of Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran
2 MA in Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran
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-EGARCH method. The results indicate that Forex, cryptocurrencies, and the Tehran Stock Exchange are symmetric, sensitive to crises, and affected by negative news, while the currency market (US dollar) is asymmetric and influenced by positive news. Also, Forex, cryptocurrencies, and currency markets have a correlation with the Tehran stock exchange, 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 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. The results of the Barunik & Krehlik frequency spillover index also suggest that the Forex market is the largest sender of return spillover, and the currency market is the largest sender of volatility spillover to the stock market in Iran. The estimated results of this index indicate the predominance of return spillover from the markets under study to the Tehran stock exchange in the short term.
Keywords
Forex
Cryptocurrencies
Bitcoin
Euro/Dollar
Cross-Border Markets
Stock Market
DCC-AR-EGARCH
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