Investigating effect of mean residence time on herd behavior on Tehran stock exchange index volatility by Heston model

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SHIRAZIAN ZAHRA

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Journal: FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES) Year:2019 | Volume:11 | Issue:40 Page(s): 13-23

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Title

Investigating effect of mean residence time on herd behavior on Tehran stock exchange index volatility by Heston model

Author(s)

SHIRAZIAN ZAHRA | Issue Writer Certificate

Keywords

volatilityQ2

Tehran Stock Exchange IndexQ2

Heston modelQ2

Herd behaviorQ2

Mean residence timeQ2

Abstract

In this article investigate the Herd behavior of stock prices inTehran stock exchange with the Heston model. Basing on parameter estimation of the Heston model obtained by minimizing the mean square deviation between the theoretical and empirical return distributions, we simulate Mean residence time of positive return. Plots of Mean residence time of positive return against the amplitude or mean reversion of volatility demonstrate a phenomenon of Herd behavior for a positive cross correlation between noise sources of the Heston model. Also, for a negative cross correlation, a phenomenon of Herd behavior is observed in plots of Mean residence time of positive return (MRTPR) against the long-run variance by increasing amplitude or mean reversion of volatility. From the simulating results of MRTPR, we observe that (i) when MRTPR is regarded as a function of the amplitude of volatility fluctuation c, there is a phenomenon of the Herd behavior for a positive cross correlation between two Wiener processes of stock price and volatility (i. e., λ > 0); (ii) when MRTPR is regarded as a function of mean reversion a, there is a phenomenon of the Herd behavior for our considered values of b and c under λ > 0; (iii) increasing a or c induces a phenomenon of the Herd behavior under λ < 0 when MRTPR is regarded as a function of mean reversion b.

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APA: Copy

SHIRAZIAN, ZAHRA. (2019). Investigating effect of mean residence time on herd behavior on Tehran stock exchange index volatility by Heston model. FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES), 11(40 ), 13-23. SID. https://sid.ir/paper/200346/en

Vancouver: Copy

SHIRAZIAN ZAHRA. Investigating effect of mean residence time on herd behavior on Tehran stock exchange index volatility by Heston model. FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES)[Internet]. 2019;11(40 ):13-23. Available from: https://sid.ir/paper/200346/en

IEEE: Copy

ZAHRA SHIRAZIAN, “Investigating effect of mean residence time on herd behavior on Tehran stock exchange index volatility by Heston model,” FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES), vol. 11, no. 40 , pp. 13–23, 2019, [Online]. Available: https://sid.ir/paper/200346/en

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