Forecasting Future Trends of the Stock Market Using the Probit Regression Approach with Emphasis on Value at Risk
Subject Areas : Journal of Capital Market Analysis
Seyed Ali
Mousavi Loleti
1
(Department of Financial Engineering, Faculty of Industrial Engineering, Iran University of Science and Technology, Tehran. Iran.)
Emran
Mohammadi
2
(Department of Financial Engineering, Faculty of Industrial Engineering, Iran University of Science and Technology, Tehran. Iran.)
Saeed
Shavvalpour
3
(Department of Economic Development Engineering, Faculty of Management, Economics and Development Engineering, Iran University of Science and Technology. Tehran. Iran.)
Keywords: Value at Risk, Probit Model, Macroeconomic Variables, Sanctions, Capital market Forecasting,
Abstract :
Forecasting has always been recognized as an important issue in financial markets and is considered a unique factor in estimating future unknown values. The aim of this research is to identify and forecast the conditions of the Tehran Stock Exchange(TSE) and the factors affecting them, focusing on the correlation between market prosperity and value at risk. To achieve this, in the first step of this study, the time series of the value at risk index on the capital market TSE was estimated using daily data and the first-order GARCH method from spring 2010 to June 2023. Then, the factors influencing prosperity in TSE were evaluated based on seasonal data from spring 2010 to June 2023 using the probit regression approach. In addition, value at risk index was calculated seasonally and the relationship between the probability of market prosperity and the value at risk index was examined using correlation coefficients.The research results show that the probability of market prosperity in the Iranian capital market has a significant negative relationship with the bank interest rate, liquidity growth and the occurrence of sanctions. There is also a significant positive relationship with the inflation rate and the growth of the exchange rate. Furthermore, the correlation analysis shows that market prosperity is directly related to equity value at risk. Assuming stable conditions, the research suggests that the probability of a prosperity market in the next three seasons is significantly higher than the occurrence of a recession.
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