Investigating and Predicting the Effects of Uncertainty Caused by the Recent Currency Crisis on Banks and Financial Institutions Stock Index
Message:
Abstract:
Exchange Rate uncertainty means an unpredictable change in the exchange rate that can cause a great impact on other economic variables and institutions such as banks and credit institutions especially in developing countries. In this study, using monthly data from the 2009/3- 2013/9, the effect of recent exchange rate crisis on Iranian banks and financial institutions is estimated and predicted. To do that, models such as VAR, VECM, Genetic and PSO Algorithm are employed. The results of estimating the VAR model indicates that there is a negative relationship between exchange rate volatility and stock market returns. Further, Co-integration test results imply the existence of an indirect long-run relationship between these two variables. By simulation of linearly and exponentially models using Genetic and PSO algorithms to compare the accuracy of these models with estimated VAR model, it was determined that VAR model can predict more accurately. Prediction results showed that persistence of exchange rate fluctuation can lead to first a diminishing increase followed by reduction in the index. However, reduction of exchange rate can lead to an increase in financial and credit institution's stock index.
Language:
Persian
Published:
Quarterly Journal of Quantitative Economics, Volume:10 Issue:3, 2015
Page:
55
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