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Investigating the Pattern of Stocks Price Reactions to Extreme Exchange Rate Fluctuations in Tehran Securities Exchange

Oroojloo, Niloofar | 2020

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 53422 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Bahramgiri, Mohsen; Aslani, Shirin
  7. Abstract:
  8. Exchange-rate has always been one of the critical macroeconomic factors influencing Iran’s economy. As a representative of the whole economy, the stock market is also affected by exchange rate fluctuations. However, the direction and the delay of this impact is not similar for all firms. This study aims to find the time and direction of the reactions to dollar fluctuations in the two most recent jumps, during 1390 and 1397, for all firms listed on Tehran Securities Exchange. It also seeks to determine why among stocks with a positive reaction, some react sooner, and some react later, based on their specific characteristics. Using a distributed lag model, we found that about one-half of the stocks have reacted positively to dollar jumps within these two periods. The results suggest that firms with a negative relationship with dollar returns react sooner than those with positive relations. Performing a novel method of decision trees, called Optimal Classification Trees (OCT), we found that a combination of the industry, firm size, book to market ratio, dividend yield, and quick ratio factors can lead to different delays in reacting to dollar rate. However, this finding is not conclusive due to the medium accuracy of the decision tree model
  9. Keywords:
  10. Stock Return ; Tehran Stock Exchange ; Classification Tree ; Exchange Rate ; Exchange Rate Fluctuations ; Firm-Specific Factors ; Optimal Classification Trees (OCT)

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