Examination of Contagion and Oil Price Volatility on Returns of the Stock Market, Exchange Rate and Gold Price in Iran: VAR-DCC-GARCH, Continuous Wavelet, and Time-Varying Wavelet Approach

Nafisi Moghadam, Maryam; Fattahi, Shahram

doi:10.22075/jem.2021.23728.1613

Examination of Contagion and Oil Price Volatility on Returns of the Stock Market, Exchange Rate and Gold Price in Iran: VAR-DCC-GARCH, Continuous Wavelet, and Time-Varying Wavelet Approach

Document Type : Original Article

Authors

Maryam Nafisi Moghadam ¹

Shahram Fattahi ²

¹ Postdoctoral Researcher in Economics, Razi University

² Associate Professor of Economics, Razi University

10.22075/jem.2021.23728.1613

Abstract

The purpose of this study is to investigate the relationship between oil price changes and volatility on stock market, foreign exchange rate, and gold rate, using weekly data from August 2013 to June 2021. First, using the VAR-DCC-GARCH approach, conditional correlations between markets are identified and the time series of volatility is extracted. Then, using volatility series, partial and multiple correlations in these markets are investigated using the continuous wavelet and WLMC wavelet approach. The results show that there is a correlation between markets and volatility in oil market can lead to volatility in other markets at different time horizons. The results of the WLMC estimate show that in the event of political uncertainty, WLMC has increased in the short, medium and long term.

Keywords

Contagion

Correlation

Multiple Correlation

Wavelet Analysis