Does Trade Volume Really Affect Market Capitalization in Iran? (مقاله علمی وزارت علوم)

چکیده

Regarding high persistent inflation in Iran, there is a serious concern which macroeconomic variables more accurately exchange rate and interest rate are the leading determinants of market capitalization in Iran. This assumption ignores some crucial factors dealing with investors expectations such as value of trade volume and takes inflationary expectation as the dominant one which is controlling all other aspects. In order to test whether trade volume representing reactions of investors to whole dynamics of market could affect the aggregate capital market, market capitalization or not, paper follows two logics. First, it would take market capitalization both in domestic currency and US dollar to exclude inflationary impact and second it would use ARDL model to have the estimates in two time-horizons, short run and long run. Results indicate that value of trade volume is a significant determinant of market capitalization. Interest rate could not explain the long run dynamics and could just carry short tun influence. Exchange rate growth along with trade volume are leading factors of market capitalization in Iranian Rial, while this holds true for Dollar capitalization as well. Ultimately, also macroeconomic factors are vividly prominent to postulate the impacts, value of trade volume is also important in every matter to shape the market aggregate value.