The relationship between liquidity and stock price in the Tehran Stock Exchange and the role of central banks

This paper study the long-run and short-run relationship between liquidity and stock price in Iran country. In order to examine the existing of such long-term and short-term relationships, CVAR method have been used. In this method after model specification, Johansen test was conducted to determine the rank of co-integration, but due to the presence of structural breaks in the model, we have used Non-standard critical values to examine the hypothesis related to significance of Johansen trace statistic. After determining the rank of co-integration, unrestricted co-integrated relationships were estimated using maximum likelihood method. Relying on economic theories, restrictions imposed on these relationships and we test these restrictions by likelihood ratio test and then extract long-run economic relationships. Using theses long-run relationships, we form system of simultaneous equations to obtain Short-term coefficients. The results shows that there is no long-term or short-term economic relationship between liquidity and stock prices. Also central bank is not able to control the stock market in long-term and short-term by using interest rate policy tool. In this study Moving Average Impact Matrix was extracted that contains interesting information about the stochastic trend and the effect of each shocks on a specific variable.

کلیدواژه ها:

stock price ، liquidity ، central bank ، co-integration ، structural break ، CVAR ، Moving average impact matrix ، stochastic trend