Document Type : Research Paper
Authors
1
Department of financial management , qom branch , Islamic azad university, qom , iran.
2
Department of management , central Tehran branch , Islamic azad university , Tehran , iran.
3
4. Department of financial management & accounting , qom branch , Islamic azad university, qom , iran.
10.22059/frj.2023.359630.1007466
Abstract
Objective: Financial and economic shocks and uncertainty in its changes are not always limited to the target market and may spread to other markets as well. The results of empirical research such as Jurado et al. (2015) and Gabor and Gabota (2020) show that the contagion of cross-sectoral uncertainty as well as the importance of these uncertainties is not constant over time. In traditional time series regression models, it is assumed that a relationship with fixed coefficients can be used at different times. The false results of this unrealistic assumption have given rise to dynamic models that are more akin to the reality of the outside world. The goal of this research is the reaction of the financial, housing and macroeconomic sectors in Iran to each other's shocks, emphasizing the effects of uncertainty contagion using dynamic models.
Methods: The present study is applied in terms of purpose and correlation analysis in terms of nature and method. In this study, in order to discover the mechanism of uncertainty transmission in three sectors of macroeconomics, finance, and housing, the time-variable parameter-vector autoregression model (TVP-VAR) presented by Koop and Korobilis (2014) is used and this model is combined with Diebold and Yilmaz (2014) method. This method uses the Kalman filter estimate to allow the predicted variance to change over time.To test the changes of Intersectoral uncertainty contagion of the monthly data in the period between March 2008 to February 2020 has been used. In this regard, the uncertainty indicators were calculated using GARCH models and then tested using the TVP-VAR approach and the analysis of variance of the generalized prediction error of the total dynamic connectedness as well as the directional dynamic connectedness of the indicator pairs.
Results: Results show that the main source of uncertainty is the macroeconomic sector and this sector is the main source and transmitter of uncertainty to other financial and housing sectors. Also, the housing sector is a net recipient of uncertainty from the other two sectors. The results of the present study indicate the bidirectional role of the financial sector in the mechanism of inter-sectoral uncertainty transmission, so that in the three-index system the financial sector has been a net receiver of uncertainty in some cases and in some period (including 2019 and 2020) has been a net source and transmitter of uncertainty. The total dynamic connectedness reflects the fact that the connectedness between the uncertainty indicators has a time varying character and shows large fluctuations during the period.
Conclusion: According to the results, by identifying the intensity and direction of fluctuations as well as the source of transmission, it is possible to improve and increase the performance of asset portfolio risk management and investment decision making by considering the variability of uncertainty transmission over time.
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