Evaluation of the Dynamic Relationship between Foreign Exchange Market, Stock Market and the Housing Market in Iran Using a Multivariate GARCH Model

Subject Areas :

Oranus Parivar ¹ (عضو هیات علمی دانشگاه آزاداسلامی واحد تهران جنوب)
Mahbobeh hassani ² (دانشگاه آزاداسلامی واحد تهران جنوب)

Received: 2016-11-18 Accepted : 2017-01-31 Published : 2017-04-21

Keywords: Stock market, Foreign Exchange Market, Housing market, Markets’ Returns, Dynamic Fluctuations of Markets,

Abstract :

This paper analyzes the dynamic relationship between housing market, stock market’s           general index and real effective exchange rate of Iran using VAR and MGARCH models. For this purpose, monthly data of time period between Farvardin 1383 till Ordibehesht 1395 (Persian calendar) have been used. Based on the obtained results, there is no significant effect of other markets’ returns on housing market returns, while there is a significant and negative effect of stock market and housing market returns on foreign exchange market returns. In addition, in this study, the effect of simultaneous fluctuations of the housing market, foreign exchange and stock markets have also been evaluated. The results show that each market is not independent from other markets and a single market fluctuations will affect on the other markets. Because of the degree of simultaneous fluctuations among three markets, in order to make decision in one market and reduce the errors in decision making, policy makers can also consider political tools in other markets. Furthermore, investors may allocate their assets to these three markets in order to reduce the risk of investment