Investigating the Market Efficiency in Tehran Stock Exchange through Artificial Intelligence

Subject Areas : Financial Accounting

mohammad jouzbarkand ¹ , Hossein Panahian ²

1 - Department of Accounting, Kashan Branch, Islamic Azad University, Kashan, Iran.
2 - Department of Accounting, Kashan Branch, Islamic Azad University, Kashan, Iran.

Received: 2021-07-02 Accepted : 2021-12-19 Published : 2023-09-01

Keywords: Artificial Neural Network, Total Share Index, market efficiency, Time series,

Abstract :

This study was an attempt to evaluate the progress of capital market efficiency in Iran. Optimal resource allocation and micro and macro investments play a key role in the capital market. The capital market's main task is to circulate capital and allocate resources efficiently and optimally. The main task of this market is to flow capital and allocate resources efficiently and optimally. Is there a regular pattern for determining the stock price? Market efficiency gains significance as it is important to know what factor or factors are effective in determining the price of the stock in the stock market or whether there is a regular pattern for determining the price of a stock. Thus, this study examined the efficiency of the capital market in Iran. In this regard, the researchers used the daily data of the total index of the Tehran Stock Exchange for 2008-2017. Artificial neural network and time series training tests were used to perform the test. The test results showed weak efficiency in the Tehran Stock Exchange and this inefficiency did not change significantly compared to the first period. In other words, in the Tehran Stock Market, one can predict returns using artificial intelligence.

References:

[1] Ebrahimi, S. O., haji shahroodi, D., Evaluating capital market efficiency by measuring the desire to return to the average of the top indices of the Tehran Stock Exchange, Third International Conference on Economics, Management, Accounting with Value Creation Approach, Shiraz, 2017, coi: MAVC03_009.

 [2] Chan, K. C., Gup, B. E., and Pan, M. P., International Stock Market Efficiency and Integration: A Study of Eighteen Nations, Journal of Business Finance and Accounting, 1997, 24(6), P.803-813. Doi: 10.1111/1468-5957.00134

[3] Daniali, M., Mansoori, H., Investigating the efficiency of Tehran Stock Exchange at a weak level and prioritizing the factors affecting it, Quarterly Journal of Economic Research (Islamic-Iranian approach), 2013, P. 71-96

[4] Doaei, M., Davarpanah, S. H., ANN-DEA Approach of Corporate Diversification and Efficiency in Bursa Malaysia, The Journal of Advances in Mathematical Finance and Aplicaton, 2017, 2(1), P.9-20. Doi:10.22034/ amfa.2017.529058

[5] Fama, E.F., Efficient Capital Markets: A Review of Theory and Empirical Work, Journal of Finance, 1970, 15 (2), P.383-417. Doi: 10.1111/j.1540-6261.1970.tb00518.x

[6] Gronewold, N., Share Market Efficiency: Tests Using Daily Data for Australia and New Zealand, Applied Financial Economics,1997, 7, P.645-657. Doi: 10.1080/758533856

[7] Gobna, R., P. K. Basu., Weak Form Efficiency in Indian Stock Market, International Business and Economics Research Journal,2007, 6(3), P.57-64. Doi: 10.19030/iber.v6i3.3353

[8] Jeong, J., Foreign Currency Crisis and Semi-Strong Efficiency of the Korean Stock Market, School of Business Administration Kyungnam University Korea, 2004.

[9] Izadikhah, M., Farzipoor Saen, R., Ahmadi, K. and Shamsi, M., How to use fuzzy screening system and data envelopment analysis for clustering sustainable suppliers? A case study in Iran, Journal of Enterprise Information Management, 2021, 34(1), P. 199-229. Doi: 10.1108/JEIM-09-2019-0262

 

[10] Khajavi, SH., Ghasemi, M., Efficient market theory and behavioral finance, Financial Research Quarterly, 2006.

 

[11] Lee, U., Do Stock Prices Follow Random Walk? Some International Evidence, International Review of Economics and Finance, 1992, 1(4), P.315-327.Doi: 10.1016/1059-0560(92)90020-D

 

[12] Lee, U., Stock Market and Macroeconomic Policies: New Evidence from Pacific Basin Countries, Multinational Finance Journal, 1997, 1(4), P.289-273.Doi: 10.17578/1-4-2

 

[13] Khoshroo, A., Izadikhah, M., Emrouznejad, A., Total factor energy productivity considering undesirable pollutant outputs: A new double frontier based malmquist productivity index, Energy, 2022, 258, doi: 10.1016/j.energy.2022.124819.

 

[14] Mobarek, A., K. Keasey., Weak-form Market Efficiency of An Emerging Market: Evidence from Dhaka Stock Market of Bangladesh, 2000, Leeds University Business School.

[15] Namazi, M., Shooshtarin Z., The Investigation of the Efficiency of Iran's Stock Exchange, Financial Research Journal, 1995, 2(7) - Serial Number 7,Summer

[16] Niknafs, J., Keramati, M. A., Estimating Efficiency of Bank Branches by Dynamic Network Data Envelopment Analysis and Artificial Neural Network, The Journal of Advances in Mathematical Finance and Aplicaton, 2020, 5(3), P.377-390. Doi: 10.22034/amfa.2019.1585957.1192

[17] Rahnama Roodposhti, F., Salehi, A., Schools and theories of finance and accounting, Second Edition, Tehran, Islamic Azad University, 2011, Central Tehran Branch Publications

[18] Rasekhi, S., Khanalipoor, A., Experimental analysis of stock market fluctuations and information efficiency (Case study of Tehran Stock Exchange), Iranian Economic Research, 2010, 13(40), P.29-57

[19] Saberi, M., Rostami, M. R, Forecasting the Profitability in the Firms Listed in Tehran StockExchange Using Data Envelopment Analysis and Artificial Neural Network, The Journal of Advances in Mathematical Finance and Aplicaton, 2016, 1(2), P.95-104.Doi: 10.22034/ amfa.2016.527823

[20] Shams, SH., Soleymani, Ashrafi, M., Investigating the relationship between price fluctuations and information asymmetry in companies listed on the Tehran Stock Exchange, Journal of Experimental Accounting Research, 2014, 3(1). Doi: 10.22051/JERA.2013.569

[21] William Poole, E. S., Phelps and Martin N. B,,  Rational Expectations in the Macro Model, Brookings Papers on Economic Activity,  1976, 2 , P. 463-514. Doi: 10.2307/2534381