Estimation of Return and Volatilities Spillover between Different Industries of Tehran Stocks’ Exchange

Subject Areas : Financial engineering

Sepideh Karami ¹ , Mohammad Ali Rastegar ²

1 - MSc. Financial Engineering, Faculty of Finance, Khatam University, Tehran, Iran
2 - Assistant Prof. , Faculty of Industrial, Tarbiat Modares University, Iran

Received: 2018-01-02 Accepted : 2018-04-24 Published : 2018-06-22

Keywords: return spillover, volatilities spillover, Dynamic Conditional Correlation (DCC), industries of Bursia,

Abstract :

Today in the financial markets there are different factors that can help investors to allocate their assets satisfactorily. The main concern for asset allocation is that if any return and volatility from a stock market spillovers into, return and volatility of another market. Spillover expresses shock transfer to other markets or countries regardless of the basic links exist between them. This paper investigates the existence of spillover effect in Tehran Stock Exchange. Specifically, we study the return and volatility spillover effects between 6 indices from August 2011 to March 2016 and Dynamic conditional Correlation model (DCC) has been employed in our study. Base on the results of this research, we reveal that the return and volatility of selected industries are impacting on each other. Some results suggest that Pharma - Industry has the highest impact and Oil, /coke and nuclear fuel Industry has the lowest impact on other selected industries