Dynamics of Self Exciting Threshold Models in Analysis of Tehran Stock Market Behavior

Subject Areas : Financial Knowledge of Securities Analysis

S. Yahya Abtahi ¹ ( استادیار دانشکده مدیریت، حسابداری و اقتصاد، واحد یزد، دانشگاه آزاد اسلامی، یزد، ایران )

Received: 2015-12-04 Accepted : 2016-01-10 Published : 2016-12-21

Keywords: Stock returnes, Regime switching, SETAR modeles,

Abstract :

Regime switching models can recognize the tendencies in financial markets and as a result the sudden change of investor behavior and price dynamics. The present study investigates the regime switching behavior of Tehran Stock Exchange using the daily data on the rate of return of stock index price in a period from 1998 to 2014 For this purpose , we use univariate autoregressive process with change in regimes via threshold methods(TAR). The results –using a self exciting threshold auto regression model (SETAR) indicate that the threshold of stock return rate in Iran is negative and the majority of the cases under study are in the high stock return regime. The results from determining the amount of zero predetermined threshold show that Iran Stock Market was in depression for 45.2% and in boom for 54.8%. The average of stock return of boom regime was .08 and of depression regime was .004 .

References:

*        ابطحی، س، ی و نیک فطرت، ح. (1391). شناسایی چرخش رژیم در بازده بازار اوراق بهادار ایران. فصلنامه مدل‌سازی اقتصادی. دوره 6، شماره 20، زمستان 1391، صفحه 41-56

*        هژبر کیانی، ک و مرادی، ع.(1390). تعیین نقاط چرخش در ادوار تجاری اقتصاد ایران با استفاده از الگوی خودبازگشتی سوئیچینگ مارکف. فصلنامه مدلسازی اقتصادی، دوره 5، شماره: 2 - صفحه:1 -25.

*        Ajmi, A. N., and Charfeddine, L. (2011). The Tunisian stock market: a regime switching approach.Asian Journal of Business and Management Sciences, Vol. 1 No. 3, 43-53.

*        Horng, w., Chen,c., & Chang, j. (2015).Threshold Model of Japan, U.K. and Canada Stock Market Volatility in Asia Markets’ Influence: Empirical Study of Hong Kong Market… International Review of Management and Business Research.. Vol. 4 Issue.3

*        Hamilton, J.D. (1989). A new approach to the economic analysis of non-stationary time series and the business cycle.Econometrica, Vol57, No 2, 357-384.

*        Ismail, T. M., and Isa, Z. (2008). Identifying regime shifts in Malaysian stock market returns. International Research Journal of Finance and Economics, Issue 15, 44-58.

*        Kuswanto, H.,and Salamah, M. (2009). Regime Switching Long Memory Model for German Stock Returns. European Journal of Economics, Finance and Administrative Sciences, 15, 7-17.

*        Maheu, J. M.,and Mccurdy, T. H. (2000).Identifying Bull and Bear markets in stock returns.Journal of Business and Economic Statistics, 18, 100-112.

*        Nielsen, S.,and Olesen, O. (2000). Regime-Switching Stock Returns and Mean Reversion. Working paper 11.

*        Schaller, H,.and Norden, S. (1997). Regime Switching in Stock Market Returns.Applied Financial Economics, 7, 177-191.

*        Wasim, A.,andBandi, K. (2011). Identifying regime shifts in Indian stock market: A Markov switching approach. MPRA Paper, 37174, 1-22.