Impacts of The Asymmetric Oil Price Volatility on Iranian Stock Returns: A Quantile Approach

Mohammad Reza Monjazeb (), Masoud Matani () and Seyyed Farhad Movahedi ()
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Mohammad Reza Monjazeb: Associate Professor of Economics, Kharazmi University
Masoud Matani: Master of Economics,Kharazmi University
Seyyed Farhad Movahedi: Ph.D. student of Economics, Mazandaran University

Quarterly Journal of Applied Theories of Economics, 2023, vol. 9, issue 4, 97-132

Abstract: This study seeks to investigate the asymmetric effect of oil price volatility on Iranian stock market returns using seasonal data from autumn 2008 to autumn 2021. For this purpose, the quantile regression model was examined in the quantiles of 0.10 (lower), 0.50 (middle), and 0.90 (higher) quantails which refer to Bearish, Normal and Bullish conditions in the stock market, respectively. The results show that the quantile estimation is not symmetrical and the positive fluctuations of oil prices in the bearish and bullish situations of the stock market have a negative and significant effect on the stock returns, and in the normal state, it does not have a significant effect on the stock returns. The effect of negative oil price fluctuations is positive and significant in all three situations of the stock market, but in the bullish situation, it has a greater effect on the stock returns than in the bearish situation. In the normal state of the stock market, oil price fluctuations should be considered symmetrically; This means that the effect of reducing oil price fluctuations is the same as the effect of its increase on the return of the Iranian stock market. Due to the fluctuating nature of oil prices in the world markets, some economic indicators of oil exporting countries, including the capital market, are subject to instability, and to predict the behavior of capital market investors, different market conditions must be analyzed differently from each other.

Keywords: Oil Price Fluctuations; Stock Market Returns; Quantile Regression (search for similar items in EconPapers)
JEL-codes: C31 E44 G12 Q43 (search for similar items in EconPapers)
Date: 2023
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