Investigating The Leverage effect and The Volatility Spillover among Exchange rate, pharmaceutical and Food industry index in Tehran stock market

Document Type : Original Article

Authors

1 Assistant Prof, Department of Management and Accounting, University of Shahid Beheshti, Tehran, Iran

2 Associate Prof, Department of Department of Accounting, University of Semnan, Semnan, Iran.

3 Ph.D. Candidate in Financial Engineering, University of Semnan, Semnan, Iran

4 Ph.D. Candidate in Financial Engineering, University of Semnan, Semnan, Iran.

Abstract

One of the factors affecting the efficiency of the pharmaceutical and food industry index in developing countries such as Iran, which has a high degree of uncertainty in macroeconomic variables, is the exchange rate (dollar). The pharmaceutical and food industry is considered one of the strategic industries in the country in terms of its direct relationship with people's health, therefore managers and policymakers have always paid attention to it. Various factors affect the food and pharmaceutical industries, one of the most important of which is exchange rate fluctuations. The main purpose of this study is to investigate the contagion of fluctuations between the return of the dollar and the return of the pharmaceutical and food industry index due to the importance of these two industries in the country's economy. In this study, first, ARMA (1,1) model was used to extract the residuals.Then, GJR-GARCH model was used to check the Leverage effects, and finally, The DECO-GARCH model was used to check the contagion of volatilities between the dollar return, pharmaceutical and food industry indices. Also, the data used in this research was extracted daily from the Bourseview.com website for the period of March 25, 2020, to November 4, 2023. The result of GJR coefficient, which is positive and significant for all return series leverage effects exist. AlsoThe results of DECO-GARCH model estimation indicate the existence of a spillover effect between the dollar return and the pharmaceutical and food industry indices.

Keywords

References

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Financial Management Perspective
Volume 13, Issue 44
2023
Pages 83-99

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