Copula approach for modeling the structure of oil price dependence and Iranian stock market indices

Subject Areas : Financial engineering

Mehdi Agabaigi ¹ , Ali Etemadi ² , Milad Slamian ³

1 - Department of Accounting, Malekan Branch, Islamic Azad University, Malekan, Iran
2 - Department of Finance, Tabriz Branch, Islamic Azad University, Tabriz, Iran
3 - Department of Accounting, Maragheh Branch, Islamic Azad University, Maragheh, Iran

Received: 2021-05-06 Accepted : 2021-05-26 Published : 2021-09-23

Keywords: Oil Price, Stock Indices, Elliptical Copula, Archimedes Copula, Copula Limit Values,

Abstract :

The purpose of study was to model the relationship between Tehran Stock Exchange indices and oil prices. The statistical population of the present study included total price indices, industry index, price index of 50 companies, and second market index and oil price in the period 2008/09/13 to 2018/11/25. To analyze the data, Copula statistical method was used using R software. Relationship between indices and oil prices was studied using eight capillary normal, Gamble, Clayton, Frank, Jo, Galambos, Hostelries and Copula function, respectively. The results showed that the relationship between the indices and the oil price using the Copula Clayton function was the best. The results showed that the relationship between the indices and the oil price using the Copula Clayton function was the best. Then based on the fitted Copula function, the correlation value was calculated based on Spearman and Kendall correlation coefficients. The results of correlation analysis showed that the correlation between indices and oil prices was positive. most financial variables do not have a normal distribution, the various analyzes used in academic institutions have skewed results, so it is suggested that the relationship between financial variables be modeled using copula and then fitted based on the copula function.