Markov switching regime model in order to assess asset pricing and uncertainty in the stock market
Subject Areas : Financial engineering
Maryam Eydizadeh
1
,
Hasan Ghodrati Ghazaani
2
,
Aliakbar Farzinfar
3
,
Hossein Panahian
4
1 - Department of Industrial Management, Kashan Branch, Islamic Azad University, Kashan, Iran.
2 - Department of Industrial Management, Kashan Branch, Islamic Azad University, Kashan, Iran.
3 - Department of Accounting, Kashan Branch, Islamic Azad University, Kashan, Iran.
4 - Department of Management and Accounting, Kashan Branch, Islamic Azad University, Kashan, Iran.
Keywords: asset pricing, Markov switching regime, uncertainty in the stock market,
Abstract :
The current research has been carried out with the aim of designing the Markov switching regime model in order to evaluate the asset pricing and uncertainty in the stock market in Iran's stock market. In order to estimate the Markov model by systematic elimination method, 130 companies were selected and based on their performance, 1400 were divided into two categories, the top 50 companies and the lowest companies, and based on random processes to determine Markov regimes, investment portfolios were formed and based on the estimation of the Markov regime were estimated. The regression estimation of the relationship between efficiency and effective factors in the companies under investigation, regardless of the categories, showed that there was an inverse relationship between risk, normal and Laplace uncertainty degrees with efficiency, and the only determining factors were market risk and asset efficiency. , return on capital, profit volatility, cash flows, company value, asset liquidity, growth opportunities, asset turnover and company size have a significant relationship with stock returns. Among top companies, lower additional returns are usually associated with lower risk fluctuations and higher degree of uncertainty, and higher share risk spending is associated with higher risk fluctuations and lower degree of uncertainty.
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