The influence of the Iranian stock market on the volatility of the stock market of trading partners in the MENA region

Trade and relations between countries are a necessary condition for the financial convergence. With this approach, the present study investigated the impact of the Iranian stock market on the stock market of Iran's trading partner in the MENA region. for this purpose, information about the total stock market index of selected countries was collected during September 2015 to June 2022 and index fluctuations calculated using wavelet analysis. Next, the VAR model was estimated and the Granger causality test was performed. Finally, the effect of the news on the country's stock market was investigated using GARCH models. The results of wavelet analysis showed that, the range of stock market fluctuations in MENA countries has increased. Based on the results of the VAR model and Granger causality test, Iran's stock market is unilaterally affected by fluctuations in the stock market of trading partner and OPEC member countries, including Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Lebanon. However, there was no sign of Iran's stock market being affected by fluctuations in the stock market of Jordan, Bahrain, Egypt, Tunisia, and Morocco. Finally, the results of the conditional variance models indicate that the selected countries follow a similar asymmetric fluctuation pattern.