Predicting Financial Contagion from Generating shock in Investment Institutions Activated in Capital Market due to Overlapping Portfolios Risk
Predicting Financial Contagion from Generating shock in Investment Institutions Activated in Capital Market due to Overlapping Portfolios Risk
Subject Areas : Financial Knowledge of Securities Analysis
Alireza Rayati Shavazi
1
(Department of finance, Management and Accounting Faculty, Azad Yazd University)
Abbas Rezaei Pandari
2
(Tarbiat Modares University)
Keywords: Financial Contagion, Overlapping Portfolio Risk, shock in investment institution, Discriminant Analysis.,
Abstract :
The risk of maintaining shared assets or overlapping portfolios risk is one of channels that cause financial contagion. Since a shock in an investor institution can spread to other investment institutions and cause great damage to them and the entire stock market and even cause a crisis in the economy, therefore; The main goal of this research is to provide a model for predicting financial contagion caused by a shock in investor institutions in Tehran Stock Exchange based on overlapping portfolios risk. This research is an analytical survey that was conducted using the statistical method of discriminant analysis. In order to investigate the goal, based on the data related to the stock portfolio of the investing institutions in the Tehran Stock Exchange, a multi-variable discriminant model for predicting financial contagion based on shocks in financial institutions has been presented. The results indicate that "risky assets value of the investment institution", "Debt value of the investment institution" and "Degree of the investing institution portfolio" have been validated as independent variables. Supervision departments can use the models presented in this study to identify industrial groups that have a high risk of overlapping portfolios and maintain the stability of the financial system by taking appropriate decisions.