Document Type : ORIGINAL ARTICLE

Authors

• Majid Aghaei ¹
• Mahdieh Rezagholizadeh ²
• samira chavoshani ²

¹ Associate professor of financial and energy economics at university of Mazandaran

² University of Mazandaran

Abstract

The stock and housing markets, as two major asset markets in the Iranian economy, may be influenced both by their mutual interactions and by macroeconomic variables such as interest rate, inflation rate, and exchange rate. Accordingly, the present study investigates the dynamics of return and volatility spillovers between these two markets over the period 2006–2021 using monthly data. In this regard, total and frequency spillovers were first extracted using the Diebold–Yilmaz and Baruník–Křehlík spillover indices, and then the effects of macroeconomic variables on return and volatility spillovers were examined using the Ordinary Least Squares (OLS) method. The results indicate that the intensity of return and volatility spillovers between the stock and housing markets in Iran is generally limited, and that most of the dynamics of each market are driven by its own internal factors. However, frequency-domain analysis shows that return spillovers are more pronounced in the medium-term horizon, whereas volatility spillovers are relatively stronger in the short term. The findings also reveal that the housing market acts, to a limited extent, as a net receiver of return spillovers in the medium term, while the stock market is a net receiver of volatility spillovers in the short term. The results further suggest that exchange rate and inflation have more persistent explanatory power and statistical significance than interest rates in explaining return and volatility spillovers. Rising exchange rates and inflation, through intensifying inflation expectations and increasing macroeconomic uncertainty,

Keywords

• Volatility and Return Spillovers
• Diebold & Yilmaz Index
• Barunik & Krehlik Index
• Exchange Rate
• Inflation Rate

Main Subjects

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