Dynamics of Returns of Exchange-Traded Funds in Tehran Stock Exchange Under Uncertainty Shock: SVAR Proxy Model Approach

Articles in Press

Document Type : Original Article

Authors

Nima Keramat ¹

Seyed fakhreddin fakhrehosseini ²

Mahmod khoddam ³

Meysam Kaviani ³

¹ Department of Economic Sciences, Ka.C., Islamic Azad University, Karaj, Iran.

² Department of Financial Management, Ka.C., Islamic Azad University, Karaj, Iran.

³ Department of Financial Management, Ka.C., Islamic Azad University, Karaj, Iran..

https://doi.org/10.22067/mfe.2025.95723.1618

Abstract

This study examines the dynamics of equity exchange-traded funds (ETFs) returns in the Tehran Stock Exchange in response to shocks arising from economic uncertainty. To identify uncertainty shocks, the proxy SVAR approach is employed within the framework of Koley and Hansen (1989). Gold is used as a proxy for uncertainty shocks, relying on unexpected international events during the period 2013–2023 (1392–1402 in the Iranian calendar), with monthly data. Gold price fluctuations around these events are extracted and introduced into the model as a structural identification instrument. Within this framework, the impact of uncertainty shocks on ETF returns is analyzed alongside other macroeconomic variables, including the exchange rate, inflation, interbank interest rate, risk aversion, and investor sentiment.

The results indicate that uncertainty shocks lead to a significant and substantial decline in ETF returns, with the strongest impact occurring within a one- to three-month horizon. This decline is primarily driven by heightened risk aversion and reduced positive investor sentiment. The effects typically persist for up to six months, after which returns revert to their initial levels. These findings are consistent with international evidence and address the gap in domestic research regarding the behavioral response of ETFs to macroeconomic uncertainties. Accordingly, adopting policies aimed at enhancing information transparency, developing risk-hedging instruments, and strengthening investor confidence is essential to mitigate the adverse effects of uncertainty shocks on the capital market.

Keywords

Return

ETF

Shock

Uncertainty

Subjects

• Capital markets

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