In this paper we study how oil price and oil price volatility affect stock return and volatility of stock return. In order to assess this effect Markov- Switching model has been used and furthermore HP filter, GARCH model and Wavelet analysis model have been used for extracting oil price volatility. Comparison of results shows that Wavelet method has more accurate and detailed results. Furthermore results show that oil price increases do not have significant effect on stock returns and only will decrease of stock return volatility. However oil price volatility in D1(t) scale that extracting from Wavelet decomposition do not has significant effect on stock return, but oil price volatility in D2(t) and D3(t)scales have positive effect on stock return in market boom condition. In addition, results show that, transition matrix is sensitive to scaling on oil price volatility.
Abbasinejad H, ebrahimi S. The Impact of Oil Shocks on Tehran Stock Exchange’s Return. qjerp 2014; 21 (68) :83-108 URL: http://qjerp.ir/article-1-640-en.html