Investigating the Hsiao’s Granger Causality among Returns of 11 World Stock Markets Indexes and Return of Tehran Stock Exchange Index

Document Type : Research Paper


1 Professor, Financial Management, Tarbiat Modares University, Tehran, Iran

2 MSc. in Financial Management, Tarbiat Modares University, Tehran, Iran

3 Professor, Industrial Management, Tarbiat Modares University, Tehran, Iran


In today’s world, markets are no longer under the limitations of a specific location and the importance of this issue is illustrated in effective decision making of economic agents, because the world financial markets are considered often valuable guideline for domestic and foreign markets. In this research, due to the connections between world stock markets, stock markets in countries with the most commercial communications with Iran during the time period of study (2005-2011) have been selected. These markets include London, Tokyo, Shanghai, Frankfurt, Paris, Milan, SIX Swiss, Istanbul, Korea, Bombay Stock Exchanges, and Dubai Financial Market. The returns of these stock markets are extracted and their causal relationships with the returns of Tehran Stock Exchange are estimated by Hsiao’s Granger Causality method. The results show that returns of markets in London, Frankfurt, Frankfurt, Paris, Milan, SIX Swiss, Tokyo, Korea and Bombay Stock Exchanges are the Hsiao’s Granger Causality for index return of Tehran Stock Exchange.


Main Subjects

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