The Effect of Economic Sanctions on Tehran Stock Exchange

Economic sanctions as political economic instruments have brought debate on effectiveness of those instruments; and assessment of the effect of economic sanctionsbetween different segments of the economy could make this debate clearer. This paper investigates the vulnerable sectors of Iran Economy dealing with economic sanctions and considers the sign and the size of the effect. We used financial data instead of real part of the economy because of its more elasticity to external shocks andinterferences. Historical data of the main index and indices of 35 different industries in Tehran stock exchange are employed to estimate panel data model based on thecapital asset pricing model (CAPM). Results show that Tehran stock exchange is affected by the sanctions but different industries are affected in different ways. Weused wald test to classify the industries by amount of affection into sets: high, relatively high, positive and negative effects. Industries with high dependency to theforeign countries for their production factors or intermediate inputs received negative effects and those with highly competitive foreign substitutions and industries withhigh export amounts are positively affected by the economic sanctions.