The Investigation of TSE Efficiency: An Emerging Market involved in pandemic, and Economic Sanctions

This study examines the efficiency of Iranian capital market after the imposition of economic sanctions, currency crisis and Covid 19 pandemic. Some events after 2008 have fundamentally changed the Iranian capital market environment and we expect these reforms to change the level of market efficiency. This research investigates the daily returns behavior in Tehran Stock Exchange (TSE) utilizing autocorrelation, augmented Dickey-Fuller, and runs tests over the period 2008-2022. The statistical significance of the data was assessed using both parametric and nonparametric test statistics. The results confirm that the Tehran Stock Exchange index has been affected by the Covid-19 pandemic crisis. It was also further revealed that economic and banking sanctions have had a direct impact on the Iranian economy and the Tehran Stock Exchange market, such that after the approval of each of the sanctions, significant structural failures were observed in the trend of the Tehran Stock Exchange index.  And also the results indicate that all tests don’t support that TSE daily returns follow random walk. Therefore, we conclude that in the Iranian capital market, abnormal returns can still be obtained by using technical and fundamental analysis.The study's contribution might have been compromised by the absence of socio-demographic, technical, financial and other significant policy factors from the analysis.This paper is the first to examine the efficiency of the capital market at a weak form, during the period of the Covid-19 pandemic and the imposition of international sanctions against the Iranian economy.