A Comparative Analysis of the Tehran Stock Exchange and Selected Stock Markets: Evidence from a Correlation Matrix

ABSTRACT: The aim of this thesis is to investigate the impact of financial crisis on Tehran Stock Exchange, comparative empirical investigation to measure the market correlation technique between Iran and specific regions by using time series data from 2000 to 2009. In particular, it focuses on market integration, measuring the co-movement of the market using monthly returns, calculated from the main price index between Iran’s market and those of the United States, England, Japan, Brazil, India, China, Russia, Turkey and Kuwait. Thesis focuses on correlation techniques calculated for three significant periods of time. These periods include before the 2007 financial crisis which includes the 2000-2006, during the financial crisis, which includes the 2007 period, and post financial crisis which includes from 2008 to 2009. Global financial crisis has affected the Iranian economy; it has not however had considerable impact on the Tehran stock exchange as compared to those of other emerging and developed markets, but there is indirect effect by decreased the demand of the oil and gas in the world. It caused deficit in the government’s budget; increased the inflation and interest rate. The empirical results indicate that Iran is a viable option for these countries to diversify their investment by investing in the market. Iran might be a beneficial economy to be a final destination for their investment. Keywords: International Diversification, Tehran Stock Exchange, Emerging Stock Market. ……………………………………………………………………………………………………………………………………………………………………………………………………………………