Document Type : Original Research Paper
Authors
Department of Economics, Faculty of Economics, Management and Social Sciences, Shiraz University, Shiraz, Iran
Abstract
BACKGROUND AND OBJECTIVES: The stock market of a country can be considered as a network that consists of different sectors which are interconnected. Presently, many researchers try to build different types of networks by focusing on different aspects of the stock market and assessment the connections between various parts of the stock markets. One of the most important industries of the stock market is the insurance industry, which in addition to creating security and reducing effective risks, can be effective in increasing the production rate of industries and their profitability. The objective of this research is to assess the circumstances of the insurance industry in the Iranian stock market and its relationship with other industries.
METHODS: In this research, a new approach was used to examine the position of the insurance industry in the stock market. In this way, firstly, one of the 36 selected industry networks of the Iranian economy, according to the active industries in the stock market, and based on their weight, in accordance with the 36 input-output table of the Iranian economy (related to the year 2015 which was published in 2019) was determined. In the next step, the correlation network was determined between how the stock market index of these 36 industries corresponded to 243 trading days per year, using the centrality criteria of the insurance industry.
FINDINGS: According to the results obtained from the analysis of the first network, the first to third ranks of the insurance industry did not achieve any of the centrality indicators. Based on these results, the telecommunications industry has had the greatest impact on the insurance industry, and the transportation industry has also had the greatest impact on the insurance industry. Based on the results obtained from the second network survey, the insurance industry stock market index, in terms of degree, closeness and special vector, won the first rank and had the highest correlation with the pharmaceutical industry stock market index.
CONCLUSION: The insurance industry is not considered a key node in the first network. The reason for that is the very small share of the added value of this industry in the country's gross domestic product. The results of the evaluations carried out of in this research show that telecommunications industry has the greatest impact on the insurance industry due to the creation of an information transmission infrastructure for insurance. The transportation industry's use of various insurance coverages makes the industry take the most influence from the insurance industry. In the second network, the stock market index of the insurance industry is considered as a key node and has the highest correlation with the stock market index of the pharmaceutical industry. This shows that in the period of research, the behavior of the stock market index of these two groups have shown a great similarity to each other. T The results of this research will be usable and useful for both policy makers and shareholders of the insurance industry, The most important application of the results of this research is that policymakers pay more attention to the consequences of mandated policies in a specific and key industry, and to be aware that wrong decisions in one sector can have many consequences for all economic sectors. Therefore, the officials in the regulatory departments, as soon as they see a crisis in a key economic sector, should immediately take appropriate decisions to prevent the spread of the crisis among other industries of the stock market.
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