The Impact of Economic Boom and Recession Periods on Stock Market Returns with Emphasis on the Automotive Group Using a Time-Varying Coefficients Approach

Articles in Press

Document Type : Original Article

Authors

yazdan gudarzi farahani ¹

Hamed Hatami ²

Alireza Mirarab bayegi ³

¹ PhD inc Economics, Faculty of Economic , University of Tehran

² PhD Student, Department of Management, Roudehen Branch, Islamic Azad University, Roudehen, Iran

³ Assistant Professor, Department of Management, Roudehen Branch, Islamic Azad University, Roudehen, Iran

https://doi.org/10.22067/mfe.2026.100107.1713

Abstract

This article, entitled “Investigating the Impact of Business Cycles on Stock Market Returns with Emphasis on the Automotive Group Using a Time-Varying Coefficients Approach and the TVP-VAR Model,” examines the dynamic relationship between business cycles (periods of economic boom and recession) and the returns of automotive group stocks in the Iranian economy. Given the severe economic fluctuations in Iran driven by sanctions, expansionary monetary policies, chronic inflation, and exchange-rate jumps, the need to investigate these relationships in a time-varying manner has become increasingly evident. To test the hypotheses, time-series data covering the solar years 1380 to 1404 and a Bayesian TVP-VAR model were employed. Key variables included automotive group stock returns, liquidity growth, inflation, the exchange rate, the interest rate, trading volume, and business-cycle indicators. The results showed that the effect of liquidity growth on automotive group returns is predominantly positive but unstable and is stronger during boom periods. Inflation exerts a significant and increasing negative impact that intensifies during deep recessions. Exchange-rate shocks also produce dual (both positive and negative) responses. By presenting impulse-response functions and time-varying coefficients, the TVP-VAR model clearly revealed nonlinear patterns that depend on the business cycle.

Keywords

Business cycles

stock market returns

automotive group

TVP-VAR model

time-varying coefficients

Subjects

• Financial monetary economy

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