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Return Predictability and Volatility, and Spillovers of Indexes Using a Multivariate Dynamic Model in Tehran Stock Exchange
Sanaei Alam, Mohsen | 2008
536
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- Type of Document: M.Sc. Thesis
- Language: Farsi
- Document No: 39210 (44)
- University: Sharif University of Technology
- Department: Management and Economics
- Advisor(s): Zamani, Shiva; Souri, Davood
- Abstract:
- Stock exchanges are one of the most important capital markets and let people and institutions to insvest their savings in stocks and therefore earn money. Investors are going to select a portfolio that has the maximum return and minimum risk; so, they try to forecast stock returns and volatilities. Predictability of stock return and volatility is also important for asset pricing and investigating market efficiency. Now, the question is “are stock returns and volatilities predictable using historical returns and volatilities?” In this research, return and volatility predictability of Tehran Stock Exchange indexes by using historical data are investigated. First, the outocorrelation of return and volatility of each index and then, spilovers of indexes are tested. Daily returns of indexes have positive outocorrelation that fade when lags increases; Monthly outocorrelations of returns are not statistically significant, and the outocorrelatin of seasonal returns has sinusian pattern. It seems, the daily autocorrelation is due to market structure and seasonal autocorrelation is due to mean reversion. Also, volatility clustering is not significant in any periods, that can be due to price restrictions and basic value. We use a VAR-BEKK model to investigate return and volatility spillovers. It seems, daily return of large stocks leads small stocks (lead-lag effect); but any spllover effect in monthly and seasonal returns and also volatility do not exhibited. Evidences of predictability exhibit market inefficiency, if they can be exploitable.
- Keywords:
- Predictability ; Efficiency ; Turbulence ; Lead Lag Effect ; Vector Autoregressive Model ; Return Spillover ; Beek Model
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