Constant Conditional Correlation Volatility Transmission Model with Long Memory Effect, evidence from Tehran and Dubai Stock Market

Subject Areas : Journal of Investment Knowledge

Seyed Mohammad Seyedhosseini ¹ , Seyed Babak Ebrahimi ² , Masoud Babakhani ³

1 - Professor, College of Industrial Engineering, Iran University of Science and Technology (IUST)
2 - PhD student, Department of Industrial Engineering, Iran University of Science and Technology
3 - Assistant professor, College of Industrial Engineering, Iran University of Science and Technology (IUST)

Received: 2013-09-05 Accepted : 2014-01-17 Published : 2014-01-17

Keywords: Return, long memory, Volatility transmission, FCCC Model,

Abstract :

The expansion of Globalization not only affects developed countries’ financial markets, but also the markets in developing countries. This condition causes investors who diversify their asset portfolio in foreign markets, pay serious attention to links between stock markets. This fact implies that there is an equilibrium relation between financial markets.Global oil price fluctuation is one of the factors that affect the capital markets in countries where the economy is based on oil revenues.  Most of these markets have long-run memory characteristic which should be considered in modeling and estimation. In this research the Constant Conditional Correlation (CCC) model is expanded in the way to imply long-term memory effect in the estimation. The data which is used is daily return of stock price and oil price in the period December 2006 to January 2010. The results indicate volatility contagion from global oil market to Dubai stock and Tehran stock market and also there is contagion effect between Dubai and Tehran stock market