Study of the Effect of Published News on Iran Capital Market

Stock market consists of a formal purchase and sale of shares of firms based on specific rules and regulations. Many factors influence shaping of information views of market agents and firms’ stock prices. Some of them are internal factors and others result from variables outside the boundaries of domestic economy. In this context, political and economic news as a strong independent variable can influence many other variables such as stock price index. The primary aim of this study is to investigate the influence of political news (including: Iranian tenth presidential elections 2009(fa.wikipedia.org), parliamentary elections for Islamic Consultative Assembly 2011 and summit of the nonaligned movement2012(www.khorshidonline.com), and economic news (including petrol rationing 2007(www.tebyan.net), decrease in interest rates 2007(www.ghatreh.com), decreased global oil prices and its impacts on the Iranian economy2008(www.farsnews.com),implementation of The Iranian targeted subsidy plan 2009(www.irinn.ir), sharprise in gold prices2010,(www.alborzonline.com)) on Tehran Stock Exchange (TSE). In this regard hypotheses on the significant effects of news on volatility of TEPIX (TSE’s main index) and industry index are tested. With respect to variance Hetoroskedastisity particularly in the securities markets, ARCH family models, specifically GARCH one is used to test hypotheses. To this end, weekday time-series data for TEPIX and industry indices has been used since the beginning of March 21th 2007 until the end of March 21th 2012 (Mehrara&Abdoli,2005). Estimation was done using Eviews6. Result showed that political news was a more positive powerful factor than economic news and caused greater volatility in TEPIX. Also political news was a more positive influential factor compared to economic news with respect to its effect on industry indices and caused greater volatility in them.