Inter-Market Analysis: Assessing Impact Level of Fluctuation in other Financial Markets on Stock Market Fluctuations

Close linkage among different markets is one of the most considerable matters in the scope of international markets such that no market can act individually and the information and news of a single market cannot be adequate for analysis. Instead, comprehensive information must be collected and analyzed from at least significant number of markets in order to achieve desirable results. Today, analyzing a market independently i.e. separate from other markets is virtually invalid and the analysts are required to carry out their analyses based on the relations between different markets. Foreign exchange (FOREX), stock, petroleum, and gold markets feature intricate time-variable, non-linear and multivariate economic systems. Different agents including political, economic, military, and supply and demand factors affect these markets. Using the daily data from January 1^st 2002 to January 1^st 2012, the current research studies impact level of fluctuations in other markets (foreign exchange and commodity i.e. crude oil and gold markets) on the stock market fluctuations. Different methods were applied including: econometric methods of Exponential Generalized Autoregressive Conditionally Heteroskedasticity (EGARCH), Augmented Dicky-Fuller (ASF), Dicky-Fuller's Generalized Least Squares method as well as Generalized Engle-Granger's Co-integration test and Juselius-Johansen's technique. Analysis results imply an inverse and significant correlation between price index of Tehran stock exchange and global gold price index while foreign exchange rate and crude oil price indices exhibit positive and significant correlations with Tehran stock exchange price index.