The Iran stock market : efficiency, volatility and links to the international oil market

Paytakhti Oskooe, Seyyed Ali (2011) The Iran stock market : efficiency, volatility and links to the international oil market. (PhD thesis), Kingston University, .


This study investigates the behaviour of stock prices or stock returns in an oil exporting developing country (Iran). Following an examination of the role of the Iran stock market and oil revenues in the Iranian economy in chapter 2, the extensive review of theoretical and empirical literature on stock market efficiency is provided in chapter 3. Chapter 4 empirically investigates the efficiency of Iran stock market in weak form. Empirical findings from employing conventional and nonlinear unit root tests even in presence of endogenous and exogenous structural break pOints indicate that the daily Iran stock prices index follow random walk theory and Iran stock market is efficient in weak form. In view of the distributional characteristics of stock returns, chapter 5 models the volatility dynamics of the Iran stock market. Due to existence of risk premium, in this market investors with long horizon are compensated with high returns for bearing high risk. On the other hand, the empirical analysis shows lack of asymmetric volatility in the behaviour of Iran stock return series. In view of the dominant role of oil export revenues in Iranian economy, chapter 6 examines the possible dynamic relationship between the Iran stock market and international oil market. The results from adopting symmetric and asymmetric mUltivariate GARCH models based on underlying data generating process indicate lack of return and volatility spillover between Iran stock returns and international oil prices.

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