Bayesian Estimation of Relationship Between Return Volatility and Stock Trading Volume of Tehran Stock Exchange Index
Subject Areas : Financial engineeringEbrahim Haj Khan Mirzaye Sarraf 1 , Teymour Mohammadi 2 , Mohammad Reza Salehi Rad 3 , Reza Taleblou 4
1 - Department in Financial Economics, Allameh Tabataba’i University, Tehran, Iran.
2 - Department of Economics, Allameh Tabataba’i University, Tehran, Iran
3 - Department of Statistics Allameh Tabataba’i University, Tehran, Iran.
4 - Department of Economics, Allameh Tabataba’i University, Tehran, iran
Keywords: Return, volatility, trading volume, bayesian approach,
Abstract :
The purpose of this study was to develop Bayesian modeling of returns volatility and turnover volumes. On this basis, the volatility of the Tehran Stock Exchange index returns and its trading volume have been studied with daily, weekly and monthly frequencies during the period of 21 April 2015 to 27 February 2019. The research findings show that the CCC model assumption of constant conditional correlation between the variables is violated and it is observed that the existing relationship is a dynamic conditional correlation type of DCC model and a negative one which implies that with increasing returns, investors due to optimism is less reluctant to sell their stock and by failing to sell it reduces the volume of transactions in the market and vice versa. On the other hand, the research findings show that considering the skew student t distribution for errors with a wider tail than the normal distribution and skewness application, it has a better performance than the other distributions.
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