Evaluation of stock, gold and dollar market performance in the period ‎before and after Corona with the quantitative approach of EGARCH ‎model

Document Type : Original Article

Author

teacher/university

Abstract

With the way the corona virus started in March and the closure of many businesses, it created problems for the country's economy. Along with the severe sanctions that have been affecting Iran's economy for a long time, the suspension of trade exchanges with countries that were in contact with Iran despite the sanctions has dealt a heavy blow to the economy. Therefore, the changes in the dollar market in March 2018 were under 15 thousand Tomans and the return of the stock exchange was the highest in 2018. Considering the sanctions issues, it can be seen that many shareholders moved from the stock market to the currency market, which According to the issues, the price of the dollar reached 31 thousand tomans in the early fall of 2019, and at the end of the third peak of the Corona virus, which was controlled to some extent, the price of gold and the dollar worldwide decreased due to political issues. One of the important events of ‎‏2020‏‎ was the spread of the corona virus, ‎whose effect on the financial markets is considered as an effective indicator ‎of the economy, and companies faced unprecedented risks in the crisis of ‎the corona virus, which contributed to instability and There was uncertainty ‎in the financial markets and a significant percentage of the value of assets ‎such as gold and dollars unexpectedly decreased during the Corona period. ‎In this article, the performance of the stock market, gold and dollar is ‎evaluated in two equal time periods, before and after the corona virus, ‎which was before the corona virus from ‎‏2‏‎/‎‏19‏‎/‎‏1397‏‎ to ‎‏12‏‎/‎‏29‏‎/‎‏1398‏‎ and the ‎time period during The corona virus in Iran, i.e. from ‎‏14‏‎/‎‏01‏‎/‎‏2019‏‎ to ‎‏10‏‎/‎‏08‏‎/‎‏2014‏‎, has been analyzed using daily data. Using quantile regression ‎based on EGARCH model, this article estimates gold and dollar returns to ‎cover stock market risk before and after Corona. The results show that the ‎returns of the dollar and gold were lower than the stock market during the ‎corona virus era, and gold showed a negative and inverse relationship with ‎the stock market in all conditions, except for the quantiles of the first ‎quarter and the second quarter. and gold is not suitable for hedging the risk ‎of the stock market, and the dollar has shown better returns than gold and ‎stocks in the rising, medium and falling conditions during the outbreak of ‎the Corona virus.‎

Keywords

Al-Awadhi, A.M. Alsaifi, KH. Al-Awadhi, A. Alhammadi, S. (2020). “Death and ontagious infectious diseases: Impact of the COVID-19 virus on stock market returns”, Journal of Behavioral and Experimental Finance, 27, 1-6.

Ali Nazimi A, & Majid Afshari Rad. (2022). Assessing the risk coverage of Iran's capital market through global markets (simultaneous trading in Iran Stock Exchange and Anas Gold Market). Financial and Economic Policy Quarterly, 9(33), 7-39.  http://qjfep.ir/article-1-1216-fa.html ‎[In Persian ].‎

Argha, L., Alizadeh, Sh., Mohantfar, Y & Taherinia, M. (2022). The basic relationship between shareholders and the fluctuations of investment returns in industrial companies listed on the Tehran Stock Exchange, Industrial Economics Research Quarterly, 5(15):99-75. ‎[In Persian ].‎ ‏ ‏ ‏https://doi.org/‎‏10.30473‏‎/indeco.‎‏2021.7960‏.

Ayoub, R. (2020). “Stock market vulnerability to the Covid-19 pandemic: Evidence from emerging Asian stock markets”, MPRA, No. 101774.

Badri Bookshop, A., Mirzapur Babajan, A., Akbar Moghadam, B. (2021). The effect of monetary policy shocks on the price of selected industrial goods in Iran using the Bayesian method, Scientific Quarterly of Industrial Economics Research, 4(12), 57-72. ‎[In Persian ].‎

Baker, Scott; Bloom, Nicholas; Davis, Steven; Kost, Kyle J.; Sammon, Marco C.; & Viratyosin, Tasaneeya. (2020). The Unprecedented Stock Market Impact of COVID-19. National Bureau of Economic Research, Inc.

Baur, Dirk; & Lucey, Brian. (2010). Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold. The Financial Review, 45(2), 217-229.

Beckmann, Joscha; Berger, Theo; & Czudaj, Robert. (2015). Does gold act as a hedge or a safe haven for stocks? A smooth transition approach. Economic Modelling, 48(C), 16-24.

Bekiros, Stelios; Boubaker, Sabri; Nguyen, Duc Khuong; & Uddin, Gazi Salah. (2017). Black swan events and safe havens: The role of gold in globally integrated emerging markets. Journal of International Money and Finance, 73(PB), 317-334.

Branson, W.H. (1983), Macroeconomic determinants of real exchange risk, In: Herring, R.J. (Ed.), Managing Foreign Exchange Risk, Cambridge University, Cambridge

Cheema, Muhammad A.; Robert W. Faff; & Kenneth Szulczyk. (2020). The 2008 Global Financial Crisis and COVID-19 Pandemic: How Safe are the Safe Haven Assets? ssrn, 36.

Cho, Dooyeon; & Han, Heejoon. (2021). The tail behavior of safe haven currencies: A cross-quantilogram analysis. Journal of International Financial Markets, Institutions and Money, 70(C).

Ciner, C. (2020). “Stock Return Predictability in the time of COVID-19”, Finance Research Letters, 101705.

De Bock, Reinout; & de Carvalho Filho, Irineu. (2015). The behavior of currencies during risk-off episodes. Journal of International Money and Finance, 53(C), 218-234.

Dias, Rui; da Silva, Jacinto Vidigal; & Dionísio, Andreia. (2019). Financial markets of the LAC region: Does the crisis influence the financial integration? International Review of Financial Analysis, 63(C), 160-173.

Dornbusch, R., Fischer, S., (1980), Exchange rates and the current account, The American Economic Review, 70(5), pp.960–971

Gates, Bill. (2020). Responding to Covid-19 — A Once-in-a-Century Pandemic? New England Journal of Medicine, 382(18), 1677-1679. https://doi.org/10.1056/NEJMp2003762

Grisse, Christian; & Nitschka, Thomas. (2015). On financial risk and the safe haven characteristics of Swiss franc exchange rates. Journal of Empirical Finance, 32, 153-164. https://doi.org/10.1016/j.jempfin.2015.03.006

Habib, Maurizio M.; & Stracca, Livio. (2012). Getting beyond carry trade: What makes a safe haven currency? Journal of International Economics, 87(1), 50-64.

Hafiziyah, A. (2019). Corona and its economic effects in the world and Iran, Corona Crisis Management Database, Faculty of Management and Economics of Imam Hossein University (AS). https://sid.ir/paper/‎‏524158‏‎/fa‎ ‎[In Persian ].‎

Heydari, H &  Bashiri, S. (2012). Investigating the relationship between the uncertainty of the real exchange rate and the stock price index in the Tehran Stock Exchange: Observations based on the VAR-GARCH model, Economic Modeling Research Quarterly, 3(9), 71. ‎ http://jemr.khu.ac.ir/article-‎‏1‏‎-‎‏238‏‎-fa.html‎ ‎[In Persian ].‎

Hosseiniyon, N., Sadat, B., Ebrahimi, Taghi,S. (2015). Investigating the transmission of yield rate volatility between stock, gold and currency markets in Iran, Iran Economic Research Quarterly, 66, 123-150. ‎  https://doi.org/10.22054/ijer.2016.7049 ‎[In Persian ].‎

Hosseinzadeh, H. (2018). Cover and safe haven of gold against stocks and inflation in Iran. Modern Economy and Trade, 14(3), 71-95‎.  https://doi.org/10.22054/joer.2018.9836 [In Persian ].‎

Iqbal, Javed. (2017a). Does gold hedge stock market, inflation and exchange rate risks? An econometric investigation. International Review of Economics & Finance, 48(C), 1-17.

Iqbal, Javed. (2017b). Does gold hedge stock market, inflation and exchange rate risks? An econometric investigation. International Review of Economics & Finance, 48(C), 1-17.

Islamlovian, K., Zare, H. (2015). Examining the impact of macro variables and alternative assets on stock prices in Iran: an autocorrelated model with distributive breaks, Iran Economic Research, 18(29):17-46. https://sid.ir/paper/2454/fa .[In Persian ].

Seifaldini; J & Rahnema Rudpashti.F (2018). Gold as a safe haven for the Tehran Stock Exchange: a mode change approach. Financial knowledge of securities analysis, 11, 147-160 https://sid.ir/paper/200353/fa .‎[In Persian ].‎

Ji, Qiang; Zhang, Dayong; & Zhao, Yuqian. (2020). Searching for safe-haven assets during the COVID-19 pandemic. International Review of Financial Analysis, 71(C).

Karimzadeh, M. (2015). Investigating the long-term relationship between stock price summary index and macroeconomic variables using the co-aggregation method in Iran's economy, Economic Research Quarterly, 8(26), 41-54. https://sid.ir/paper/‎‏2668‏‎/fa‎ [In Persian].‎

Ketabferosh Badri, A., Mirzapourbabajan, A, & Akbari Moghadam, Bait Elah. (2019). The impact of monetary policy shocks on the price of selected industrial goods in Iran using the Bayesian method. Industrial Economics Research, 4(12), 57-72. https://sid.ir/paper/381284/fa

  1. Kabir Hassan; Hadrian Geri Djajadikerta; Choudhury, Tonmoy; & Muhammad Kamran. (2021). Safe havens in Islamic financial markets: COVID-19 versus GFC | Request PDF. https://doi.org/http://dx.doi.org/10.1016/j.gfj.100643

Ma, Xiaomeng; Yang, Ruixian; Zou, Dong; & Liu, Rui. (2020). Measuring extreme risk of sustainable financial system using GJR-GARCH model trading data-based. International Journal of Information Management, 50, 526-537. https://doi.org/10.1016/j.ijinfomgt.12.013

Narayan, P. K. Devpura, N. Hua, W. (2020). “Japanese currency and stock market— What happened during the COVID-19 pandemic?”,Economic Analysis and Policy.

Narayan, P. K. Phan, D. H. B. Liu, G. (2020). “COVID-19 lockdowns, stimulus packages, travel bans, and stock returns”, Finance research letters, 101732.

Omane-Adjepong, Maurice; & Alagidede, Imhotep Paul. (2021). Exploration of safe havens for Africa’s stock markets: A test case under COVID-19 crisis. Finance Research Letters, 38(C).

Salisu, Afees A.; Raheem, Ibrahim D.; & Vo, Xuan Vinh. (2021). Assessing the safe haven property of the gold market during COVID-19 pandemic. International Review of Financial Analysis, 74, 101666. https://doi.org/10.1016/j.irfa.101666

Silva, Petrônio C. L.; Batista, Paulo V. C.; Lima, Hélder S.; Alves, Marcos A.; Guimarães, Frederico G.; & Silva, Rodrigo C. P. (2020). COVID-ABS: An Agent-Based Model of COVID-19 Epidemic to Simulate Health and Economic Effects of Social Distancing Interventions. arXiv:2006.10532 [physics]. https://doi.org/10.1016/j.chaos.110088

Soltani, A &  Sadeghi, S. (2015). The impact of the 2008 financial crisis on the development process of Southeast Asian countries (case study: Malaysia), Nation Research, 1(11), 1-25. https://civilica.com/doc/589220 ‎[In Persian ].‎

Urquhart, Andrew; & Zhang, Hanxiong. (2019). Is Bitcoin a hedge or safe haven for currencies? An intraday analysis. International Review of Financial Analysis, 63, 49-57. https://doi.org/10.1016/j.irfa.02.009

Wang, K. M. & Lee, Y. M. (2016), Hedging exchange rate risk in the gold market: A panel data analysis. Journal of Multinational Financial Management, 35, 1-23

Wen, Xiaoqian; & Cheng, Hua. (2018). Which is the safe haven for emerging stock markets, gold or the US dollar? Emerging Markets Review, 35, 69-90. https://doi.org/10.1016/j.ememar.12.006

 

References

  1.  

    Al-Awadhi, A.M. Alsaifi, KH. Al-Awadhi, A. Alhammadi, S. (2020). “Death and ontagious infectious diseases: Impact of the COVID-19 virus on stock market returns”, Journal of Behavioral and Experimental Finance, 27, 1-6.

    Ali Nazimi A, & Majid Afshari Rad. (2022). Assessing the risk coverage of Iran's capital market through global markets (simultaneous trading in Iran Stock Exchange and Anas Gold Market). Financial and Economic Policy Quarterly, 9(33), 7-39.  http://qjfep.ir/article-1-1216-fa.html ‎[In Persian ].‎

    Argha, L., Alizadeh, Sh., Mohantfar, Y & Taherinia, M. (2022). The basic relationship between shareholders and the fluctuations of investment returns in industrial companies listed on the Tehran Stock Exchange, Industrial Economics Research Quarterly, 5(15):99-75. ‎[In Persian ].‎ ‏ ‏ ‏https://doi.org/‎‏10.30473‏‎/indeco.‎‏2021.7960‏.

    Ayoub, R. (2020). “Stock market vulnerability to the Covid-19 pandemic: Evidence from emerging Asian stock markets”, MPRA, No. 101774.

    Badri Bookshop, A., Mirzapur Babajan, A., Akbar Moghadam, B. (2021). The effect of monetary policy shocks on the price of selected industrial goods in Iran using the Bayesian method, Scientific Quarterly of Industrial Economics Research, 4(12), 57-72. ‎[In Persian ].‎

    Baker, Scott; Bloom, Nicholas; Davis, Steven; Kost, Kyle J.; Sammon, Marco C.; & Viratyosin, Tasaneeya. (2020). The Unprecedented Stock Market Impact of COVID-19. National Bureau of Economic Research, Inc.

    Baur, Dirk; & Lucey, Brian. (2010). Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold. The Financial Review, 45(2), 217-229.

    Beckmann, Joscha; Berger, Theo; & Czudaj, Robert. (2015). Does gold act as a hedge or a safe haven for stocks? A smooth transition approach. Economic Modelling, 48(C), 16-24.

    Bekiros, Stelios; Boubaker, Sabri; Nguyen, Duc Khuong; & Uddin, Gazi Salah. (2017). Black swan events and safe havens: The role of gold in globally integrated emerging markets. Journal of International Money and Finance, 73(PB), 317-334.

    Branson, W.H. (1983), Macroeconomic determinants of real exchange risk, In: Herring, R.J. (Ed.), Managing Foreign Exchange Risk, Cambridge University, Cambridge

    Cheema, Muhammad A.; Robert W. Faff; & Kenneth Szulczyk. (2020). The 2008 Global Financial Crisis and COVID-19 Pandemic: How Safe are the Safe Haven Assets? ssrn, 36.

    Cho, Dooyeon; & Han, Heejoon. (2021). The tail behavior of safe haven currencies: A cross-quantilogram analysis. Journal of International Financial Markets, Institutions and Money, 70(C).

    Ciner, C. (2020). “Stock Return Predictability in the time of COVID-19”, Finance Research Letters, 101705.

    De Bock, Reinout; & de Carvalho Filho, Irineu. (2015). The behavior of currencies during risk-off episodes. Journal of International Money and Finance, 53(C), 218-234.

    Dias, Rui; da Silva, Jacinto Vidigal; & Dionísio, Andreia. (2019). Financial markets of the LAC region: Does the crisis influence the financial integration? International Review of Financial Analysis, 63(C), 160-173.

    Dornbusch, R., Fischer, S., (1980), Exchange rates and the current account, The American Economic Review, 70(5), pp.960–971

    Gates, Bill. (2020). Responding to Covid-19 — A Once-in-a-Century Pandemic? New England Journal of Medicine, 382(18), 1677-1679. https://doi.org/10.1056/NEJMp2003762

    Grisse, Christian; & Nitschka, Thomas. (2015). On financial risk and the safe haven characteristics of Swiss franc exchange rates. Journal of Empirical Finance, 32, 153-164. https://doi.org/10.1016/j.jempfin.2015.03.006

    Habib, Maurizio M.; & Stracca, Livio. (2012). Getting beyond carry trade: What makes a safe haven currency? Journal of International Economics, 87(1), 50-64.

    Hafiziyah, A. (2019). Corona and its economic effects in the world and Iran, Corona Crisis Management Database, Faculty of Management and Economics of Imam Hossein University (AS). https://sid.ir/paper/‎‏524158‏‎/fa‎ ‎[In Persian ].‎

    Heydari, H &  Bashiri, S. (2012). Investigating the relationship between the uncertainty of the real exchange rate and the stock price index in the Tehran Stock Exchange: Observations based on the VAR-GARCH model, Economic Modeling Research Quarterly, 3(9), 71. ‎ http://jemr.khu.ac.ir/article-‎‏1‏‎-‎‏238‏‎-fa.html‎ ‎[In Persian ].‎

    Hosseiniyon, N., Sadat, B., Ebrahimi, Taghi,S. (2015). Investigating the transmission of yield rate volatility between stock, gold and currency markets in Iran, Iran Economic Research Quarterly, 66, 123-150. ‎  https://doi.org/10.22054/ijer.2016.7049 ‎[In Persian ].‎

    Hosseinzadeh, H. (2018). Cover and safe haven of gold against stocks and inflation in Iran. Modern Economy and Trade, 14(3), 71-95‎.  https://doi.org/10.22054/joer.2018.9836 [In Persian ].‎

    Iqbal, Javed. (2017a). Does gold hedge stock market, inflation and exchange rate risks? An econometric investigation. International Review of Economics & Finance, 48(C), 1-17.

    Iqbal, Javed. (2017b). Does gold hedge stock market, inflation and exchange rate risks? An econometric investigation. International Review of Economics & Finance, 48(C), 1-17.

    Islamlovian, K., Zare, H. (2015). Examining the impact of macro variables and alternative assets on stock prices in Iran: an autocorrelated model with distributive breaks, Iran Economic Research, 18(29):17-46. https://sid.ir/paper/2454/fa .[In Persian ].

    Seifaldini; J & Rahnema Rudpashti.F (2018). Gold as a safe haven for the Tehran Stock Exchange: a mode change approach. Financial knowledge of securities analysis, 11, 147-160 https://sid.ir/paper/200353/fa .‎[In Persian ].‎

    Ji, Qiang; Zhang, Dayong; & Zhao, Yuqian. (2020). Searching for safe-haven assets during the COVID-19 pandemic. International Review of Financial Analysis, 71(C).

    Karimzadeh, M. (2015). Investigating the long-term relationship between stock price summary index and macroeconomic variables using the co-aggregation method in Iran's economy, Economic Research Quarterly, 8(26), 41-54. https://sid.ir/paper/‎‏2668‏‎/fa‎ [In Persian].‎

    Ketabferosh Badri, A., Mirzapourbabajan, A, & Akbari Moghadam, Bait Elah. (2019). The impact of monetary policy shocks on the price of selected industrial goods in Iran using the Bayesian method. Industrial Economics Research, 4(12), 57-72. https://sid.ir/paper/381284/fa

    1. Kabir Hassan; Hadrian Geri Djajadikerta; Choudhury, Tonmoy; & Muhammad Kamran. (2021). Safe havens in Islamic financial markets: COVID-19 versus GFC | Request PDF. https://doi.org/http://dx.doi.org/10.1016/j.gfj.100643

    Ma, Xiaomeng; Yang, Ruixian; Zou, Dong; & Liu, Rui. (2020). Measuring extreme risk of sustainable financial system using GJR-GARCH model trading data-based. International Journal of Information Management, 50, 526-537. https://doi.org/10.1016/j.ijinfomgt.12.013

    Narayan, P. K. Devpura, N. Hua, W. (2020). “Japanese currency and stock market— What happened during the COVID-19 pandemic?”,Economic Analysis and Policy.

    Narayan, P. K. Phan, D. H. B. Liu, G. (2020). “COVID-19 lockdowns, stimulus packages, travel bans, and stock returns”, Finance research letters, 101732.

    Omane-Adjepong, Maurice; & Alagidede, Imhotep Paul. (2021). Exploration of safe havens for Africa’s stock markets: A test case under COVID-19 crisis. Finance Research Letters, 38(C).

    Salisu, Afees A.; Raheem, Ibrahim D.; & Vo, Xuan Vinh. (2021). Assessing the safe haven property of the gold market during COVID-19 pandemic. International Review of Financial Analysis, 74, 101666. https://doi.org/10.1016/j.irfa.101666

    Silva, Petrônio C. L.; Batista, Paulo V. C.; Lima, Hélder S.; Alves, Marcos A.; Guimarães, Frederico G.; & Silva, Rodrigo C. P. (2020). COVID-ABS: An Agent-Based Model of COVID-19 Epidemic to Simulate Health and Economic Effects of Social Distancing Interventions. arXiv:2006.10532 [physics]. https://doi.org/10.1016/j.chaos.110088

    Soltani, A &  Sadeghi, S. (2015). The impact of the 2008 financial crisis on the development process of Southeast Asian countries (case study: Malaysia), Nation Research, 1(11), 1-25. https://civilica.com/doc/589220 ‎[In Persian ].‎

    Urquhart, Andrew; & Zhang, Hanxiong. (2019). Is Bitcoin a hedge or safe haven for currencies? An intraday analysis. International Review of Financial Analysis, 63, 49-57. https://doi.org/10.1016/j.irfa.02.009

    Wang, K. M. & Lee, Y. M. (2016), Hedging exchange rate risk in the gold market: A panel data analysis. Journal of Multinational Financial Management, 35, 1-23

    Wen, Xiaoqian; & Cheng, Hua. (2018). Which is the safe haven for emerging stock markets, gold or the US dollar? Emerging Markets Review, 35, 69-90. https://doi.org/10.1016/j.ememar.12.006

     

Public Sector Economics Studies
Volume 2, Issue 3 - Serial Number 5
December 2023
Pages 313-334

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History

  • Receive Date: 02 October 2023
  • Revise Date: 13 December 2023
  • Accept Date: 13 December 2023

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