Energy Prices and Investor's Sentiments in the Tehran Stock Exchange: An ARDL Bounds Testing Approach

• Published in: Iranian journal of management studies Vol. 16; no. 2; pp. 535 - 547
• Main Authors: Nadiri, Mohammad, Alavi, Seyed Hasan Masoudi
• Format: Journal Article
• Language: English
• Published: Qom University of Tehran, Farabi College 22.03.2023; University of Tehran, Qom College
• Subjects: Capital markets; Crude oil prices; Energy industry; Energy prices; Financial markets; International economic relations; International trade; Investment analysis; Natural gas; Natural gas reserves; Securities industry; Stock exchanges; Stock-exchange; Stocks; Iran; China
• ISSN: 2008-7055; 2345-3745
• DOI: 10.22059/ijms.2022.337642.674913

The main purpose of this study is to examine the relationship between energy prices (oil and natural gas) and individual investor sentiments on the Tehran stock exchange. Oil and natural gas are two strategic commodities among the world's most important energy sources. Energy price fluctuations, directly and indirectly, affect the economy and financial markets, especially those oil-exporting and importing countries. We monthly examined the relationships between energy prices and investor sentiment using the Autoregressive Distributed Lag (ARDL) technique from 2010 to 2020. The results showed that crude oil prices positively affect investor sentiment both in the long and short run, which is consistent with the oil-exporting structure of the Iranian economy. Moreover, the results demonstrated neither a short-run nor a long-run association between gas prices and investor sentiment. The study's findings suggest that oil prices could be used to predict investor sentiments and optimize an investor's portfolio.