Investigation of the Effective Factors on the Price of Shares Traded in Stock Exchange

Document Type : پژوهشی

Authors

• hamidreza izadi ¹
• Maryam Izadi ²

¹ Chabahar Maritime University

² Semnan University

https://doi.org/10.22067/pm.v23i11.18240

Abstract

With regard to the importance of oil price changes in Iran’s oil revenues as an oil exporter and its effects on it's economy, the aim of this paper is to investigate the effects of the oil shocks on the changes of the most important index of the Stock Exchange in Iran called the total price index.
Introduction
Investigating the price of shares in stock exchange and studying and controlling the investment market, which is an important part of financial markets in every country, play an important role in policy making and applying macro-economic policies. Controlling available savings and liquidity and conducting them towards different parts of national economics, this market leads to the investigation and transmission of investment to economic institutions and thereby providing future perspectives of economic firms. Given the fact during a short period of time, shock and the intensity of the movement of liquidity and capital of both the private sector and people of society in transfering from economic parts to non-economic ones are high, the recognition and introduction of information, structure and prediction of short term market for determining appropriate policies is vital.
Methodology
In this work, having looked at monthly statistics data (2001-2012), the reseachers tried to investigate the factors affecting the value of shares in the stock market. It is done by using a non-nested optimization model test to select the suitable model and to examine the factors affecting the value of shares in the stock market. In addition, their relationship will be described and estimated based on the VAR method. On the other hand, since the prediction of financial and capital market is efficient and stable, we can provide a framework for achieving economic growth and development. Thus, this paper will examine the structural stability and forecast it's market based on Auto Regression Moving Average process and according to the results, the applicable policies will be suggested.
Results and Discussion
The primary duty of exchange stock is providing capital stock for the government, the private, and industry sectors in the form of collecting stagnant savings and the liquidity of private sector in order to finance the long-term investment projects.
Stock Exchange is the official and confident authority where holders of stagnant savings can relatively find reliable investment places and use their surplus funds to invest on companies or buy bonds to gain a guaranteed profit.
In other words, the Stock Exchange plays a dual function in the structure of a free economy: one the one hand, it helps to increase the capital of the government and the private sector, and on the other hand, it creates the secondary market to meeting the potential and actual investors. Investigation, controlling and conducting the market can lead to the financial resources of the capital market and investment for development and growth and the policies are planned on the basis of the goals of macroeconomic. Economists believe one of the reasons for the lack of the development of developing countries is the low level of investment. In this regard, the capital market is the main and important centre to attract these savings. Accordingly, we should identify its influential factors in the market, and thus use appropriate policies for the progression and growth of the market.
Achieving the optimal growth and development of economy without mobilization of financial resources in long term is impossible. In this regard, the position and the role of capital market are of high importance.
The capital market, which is the market of demand and supply of financial resources, can play a vital role when the process of supply and demand of its financial sources is the optimal allocations. The main prerequisite for the optimal allocations of resources in the capital market is the efficiency in their performance.
Thus, the difference between effective and efficient capital markets with inefficient markets is in the phenomenon of information and having access to them.
As the information related to the capital market (for a comprehensive, coherent and effective market activity) increases, the impact of the capital market on the growth and development of economy becomes more.
Conclusions and Suggestions
Thus, policy makers should pay attention to the Stock Exchange, its flourishing growth and to government policies, control the foreign exchange market, prevent the uncontrolled growth of liquidity, eliminate the cumbersome investment regulations and incentives tax, and finally draw a plan for implementation of economic policies.
In this regard, it is essential the country's economic managers identify macro-economic variables affecting the stock market, especially government-controlled variables and how their influence can lead to appropriate policies for the stimulatation of the market and growth of economy.

Keywords

• value of shares
• non-nested test
• forecasting

References

[1] Arouri, M. E. H., Lahiani, A. and Nguyen, D. (2011).Return and volatility transmission between worlds oil prices and stock markets of the GCC countries. Economic Modelling, 28: 1815–1825.

[2] Akaike, H. (1973).Information Theory and the Extension of the Maximum Likelihood Principle. In Proceeding of the Second International Symposium on Information Theory, Eds B.N. Petrov and F. Csaki, Budapest, 267-81.

[3] Barzani, M.V, Dalali, R, Samadi, S. And Faaljo.H.R (2006). The Relationship between Macroeconomic Variables and Value of Shares Market on the Tehran securities Exchange.Economic Research Review.Economic Research Insttitue. (In Persian).

[4] Basher, S.A, Haug, A. A and Sadorsky, P. (2012). Oil prices, exchange rates and emerging stock markets, Energy Economics, 34:227–240.

[5] Davidson, R. and J.G. MacKinnon (1981).Several Tests for Model Specification in the Presence of Alternative Hypothesis. Econometrica, 49: 781-93.

[6] Eslamloueian, R.; Zare, H. (2007). The Impact of Macro Variables and Alternative Assets on Stock Price Movement in Iran: an ARDL Model. Iranian Economic Research, 29:17-46. (In Persian).

[7] Filis, G. (2010). Macro economy, stock market and oil prices: Do meaningful relationships exist among their cyclical fluctuations? .Energy Economics, 32: 877–886.

[8] Fisher, G.R. and M. McAleer, (1981).Alternative Procedures and Associated Tests of Significance for Non-Nested Hypotheses. Journal of Econometrics, 16: 103-19.

[9] Godfrey, L.G. and M.H. Pesaran (1983).Test of Non-Nested Regression Models: Small Sample Adjustments and Monte Carlo Evidence. Journal of Econometrics, 21: 133-54.

[10] Gjerde, ø. & F. Sættem. (1999). Causal Relations among Stock Returns and Macroeconomic Variables in a Small, Open Economy. Journal of International Financial Markets Institutions and Money, 9: 61-74.

[11] Henriques, I. and Sadorsky, P. (2008).Oil prices and the stock prices ofalternative energy companies. Energy Economics, 30: 998–1010

[12] Kwon, C.S., Shin, T.S. & Bacon, F.W. (1997). The Effect of MarcoeconomicVariables on Stock Market Returns in Developing Market. Multinational Business Review, 5: 63-70.

[13] Kia, A. (2003). Rational Speculators and Equity Volatility as a Measure of ex ante Risk. Global Finance Journal, 14: 135-157.

[14] Lucas, R. E. (1978).Asset Prices in an Exchange Economy. Econometrica, 46, 6: 1426-1445.

[15] Lee, B. S. (1992). Causal Relations among Stock Returns, Interest Rates, Real Activity, and Inflation. The Journal of Finance, 74, 4: 1591-1603.

[16] Mehrabiyan, A. (2004). Sensitivity stock market to the fiscal and monetary fluctuations. Economic Research Review.Economic Research Insttitue, 1, 1. (In Persian).

[17] Pesaran, M.H. (1974).On the General Problem of Model Selection. Review of Economic Studies, 41:153-71.

[18] Schwarz, G. (1978).Estimating the Dimension of a Model. Annals of Statistics, 6: 461-4.

[19] Taghavi, M and Jenani, M.H. (2000). Study of Cointegration Relationship between the Stock Price Index at Tehran securities Exchange and Macroeconomic Variables.Economics and Management, 44:77-90. (In Persian).

[20] Tashkini, A. (2005). Applied econometrics with microfit. Dibagaran Tehran publishing co. (In Persian).

[21] Verma, R. & T. Ozuna. (2005).Are Emerging Equity Markets Responsive to Cross-Country Macroeconomic Movements? Evidence from Latin America. International Financial Markets Institutions and Money, 15: 73-87.

[22] Wongbangpo, Subhashc. Sharma, S. (2002). Stock Market and Marcoeconomic Fundamental Dynamic Interactions: A SEAN-5 Countries. Journal of Asian Economic, 13.