Studying the Dependence Structure of Tehran Stock Exchange and Over-the-Counter Market by Using Constant and Time-Varying Conditional Copula Functions

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Dehghan, Arman | 2014

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 46364 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Zamani, Shiva
Abstract:
In this thesis, we study the dependence structure between the Tehran Stock Exchange and over-the-counter market, as the two main Iranian capital market institutions. Several constant and time-varying conditional Copula functions are used to model this dependence structure from October 2009 to August 2014. It is shown that, compared to constant conditional copulas, time-varying conditional copulas, provide a better performance. Analyzing the conditional tail dependence of these indices shows an asymmetric dependence structure. Also, investigating the dynamic conditional correlation and conditional tail dependence, using time-varying conditional copulas, reveals large variations and an increasing trend in these criteria. The high dependence of indices in the recent periods, shows that between the two markets, portfolio diversification benefits are decreased and the over-the-counter market does not serve as a safe harbor, as it was used to be
Keywords:
Dependence Structure ; Stock Market ; Iran ; Copula Functions ; Tehran Stock Exchange ; Time-varying Conditional Copula Functions ; Generalized Autoregressive Score (GAS)Model ; Conditional Tail Dependence