The Impact of Exchange Rate Fluctuations on Export-Oriented Stocks (A Case Study of the Tehran Stock Exchange)

This paper investigates the effects of the impact of exchange rate fluctuations on stock returns of Export-oriented companies using the OLS and GARCH estimation models. Foreign Exchange rate is one of the most important means through which a country’s relative level of economic health is determined.The opening up to the global market has made Iran witness Exchange Rate Fluctuations especially between the Iranian Rial and the US Dollar. With such exchange rate fluctuations are uncertainties that affect the export earnings of a country and stock returns of Export -oriented companies. The objective of this study was to determine the impact of Exchange Rate Fluctuations on stock returns of Export-oriented companies. The study used secondary data in order to achieve the stated research objective. The data was obtained from Iran Plan and Budget Organization, Statistical Center of Iran and Central Bank of Iran. Stock returns of Export-oriented companies in Tehran Stock Exchange were analyzed with the exchange rate Fluctuations for the period of five years (2012-2017). Other variables of the study were interest rates and inflation rates. This was to understand how these factors affect stock returns of Export-oriented companies. In order to test the relationship between stock returns of Export-oriented companies.and exchange rate volatility, interest rates and inflation rates, multiple regression was employed. The study found exchange rate Fluctuations affects stock returns of Export-oriented companies.The principal conclusion in this research is that Exchange Rate Fluctuations has an significant impact on stock returns of oil and petrochemical companies. Finally, This effect is positive in long run.