Examination of Dynamic Correlation between Major Assets in Iran by DCC-GARCH Approach

This study investigates the time-varying correlations among oil and coin prices، and exchange rate in Iran. Since investment is a key factor in economic growth and development، so the necessary funds should be provided and directed towards manufacturing and industrial sectors. In addition، understanding the relationships among financial variables allows to the investor to reduce overall portfolio risk without harming to the return on investment. In this paper we use monthly data of the oil and coin prices، and exchange rate in Iran over the period 1991:3 to 2011:2 and examine time-varying correlations using Dynamic Conditional Correlation - Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH) approach by G@RCH6 software. The analyses made in milieu of the world financial crisis (2008) show that the conditional correlations among assets are time-varying and world financial crisis causes significant changes in dynamic relationships among assets under study in Iran.