The Impact of Exchange Rate, Oil, and Gold Prices on the Tehran Stock Exchange in Bull and Bear Markets with a Behavioral Finance Approach: New Evidence from the THSVAR Model

Document Type : Original Article

Authors

1 Assistant Professor, Department of Economics and Administrative Science, Qom University.

2 Ph.D. Student, Department of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran.

10.22091/ise.2025.11641.1005

Abstract

The stock market has witnessed a significant increase in public interest and participation in recent years. Simultaneously, the growing interconnection among various financial markets has led to notable impacts of shocks from one market on the predictability of the overall stock market index. Behavioral finance concepts have also gained prominence, as investors' decisions are often influenced by psychological factors such as loss aversion and herd behavior. This study aims to examine the response of the overall stock market index to shocks from currency, oil, and gold markets, emphasizing the role of bull and bear market conditions and behavioral finance concepts.

To achieve this goal, monthly data from April 2011 to July 2024 were analyzed using the THSVAR model. The results indicate that the overall stock market index exhibits a significant tendency to react in line with shocks originating from the currency, oil, and gold markets. Positive shocks in these markets have an increasing effect, while negative shocks have a decreasing effect on the index. Moreover, the index's response to negative shocks is significantly stronger than its reaction to positive shocks. These asymmetric reactions are particularly pronounced during bear market conditions, where loss aversion and investors’ emotional behaviors amplify the intensity of the shocks. This study highlights that in addition to economic factors, behavioral finance concepts play a crucial role in market responses to spillover shocks from other markets. Investors can leverage an understanding of psychological effects to design better risk management strategies and make more informed decisions. Financial analysts can also use these findings to improve predictive models. Furthermore, awareness of the stock market's asymmetric sensitivity to negative shocks can assist policymakers in devising targeted measures to mitigate systemic risks and stabilize market conditions.

Keywords

Files

Share

How to cite

Statistics