Exchange Rate Volatility and Stock Returns and Its Impact on the Tehran Stock Exchange: A Correlation Analysis with a Financial Approach
Keywords:
Exchange rate, stock returns, Tehran Stock Exchange, Correlation analysis, international trade, portfolio balance, Systematic riskAbstract
This study investigates the relationship between exchange rate volatility and stock returns in the Tehran Stock Exchange. For this analysis, monthly data from 2011 to 2023 were collected, and various statistical methods such as correlation analysis were employed. Specifically, Pearson correlation analysis and multivariate regression were applied. The results clearly indicate a positive and significant relationship between the exchange rate and overall stock returns (r = 0.48). Moreover, this relationship is stronger in export-oriented industries (r = 0.62). Conversely, a negative relationship is observed in import-dependent industries (r = -0.39). Petrochemical and basic metals industries benefit from an increase in exchange rates, while the automotive and pharmaceutical industries face declines. These findings are consistent with theories of international trade and portfolio balance, and they provide implications for risk management and economic policymaking.
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