Document Type : Science - Research (Islamic Risk Management Tools)

Authors

• AbdolMohammad Kashian ¹
• Seyyed Kazem Ebrahimi ²
• negin ghasemi ³
• moha,mmad Ebrahim Taherian ³

¹ Associate Professor, Faculty of Economics, Management and Administrative Sciences, Semnan University, Semnan, Iran

² Semnan University Accounting Department

³ Department of Accounting, Faculty of Economics, Management and Administrative Affairs, Semnan University, Semnan Province

Abstract

While options contracts are primarily intended for hedging and mitigating potential risks arising from price fluctuations, research indicates that in many cases, trading these contracts can itself influence the prices of the underlying assets, sometimes even affecting the prices in the underlying market. This study aims to investigate the impact of derivative market (stock options) trading volume on stock prices in the Tehran Stock Exchange. The case study focuses on active automotive companies listed on the Tehran Stock Exchange, whose stock options are also traded on the exchange in addition to their stock. The research employs a Panel Autoregressive Distributed Lag (Panel ARDL) method, chosen based on the nature and characteristics of the data. The results show that stock prices tend to increase concurrently with increased trading activity in the options market. This suggests, firstly, that the stock market is sensitive to and influenced by the derivative market, and secondly, that this influence is positive, as if the trading volume in the derivative market acts as a signal for the stock market. Market participants, upon receiving signals from the trading volume in the derivative market, may anticipate an increase in stock prices. Considering the shallow depth of the derivative market in the Tehran Stock Exchange and the susceptibility of the stock market to these trades, it is recommended that oversight of this market be intensified.

Keywords

• Stock option
• automotive stocks
• panel autoregressive distributed lag (Panel ARDL) model
• Tehran Stock Exchange

Main Subjects

• Science - Research (Islamic Risk Management Tools)