THE RISK- RETURN RELATIONSHIP DYNAMICS OF IRAN'S STOCK MARKET: NEW EVIDENCE USING GARCH- JUMP MODEL

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RASEKHI SAEED; ASADI SEYED PEYMAN; SHEIDAEE ZAHRA

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Journal: Iranian Journal of Economic Research Year:2016 | Volume:21 | Issue:66 Page(s): 59-83

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Information Journal Paper

Title

THE RISK- RETURN RELATIONSHIP DYNAMICS OF IRAN'S STOCK MARKET: NEW EVIDENCE USING GARCH- JUMP MODEL

Author(s)

RASEKHI SAEED | ASADI SEYED PEYMAN | SHEIDAEE ZAHRA | Issue Writer Certificate

Keywords

RISK- RETURN RELATIONSHIPQ1

MIXED GARCH MODELSQ1

JUMP DIFFUSION MODELQ1

Abstract

The conventional literature suggests a positive relationship between the expected return and the conditional volatility, but according to the empirical evidence there is not a specific and constant relationship between them. In this regard, the study investigates the role of significant characteristics of financial asset prices including time-varying conditional volatility and jump in the relationship between risk and return in Tehran stock market. For this purpose the ARJI-GARCH model which includes both features is applied and the results are compared with two more simple models i.e. GARCH-M and GARCH- JUMP.The former consists of the conditional variance and the latter has both features but with the constant probability of the jump. The empirical findings using daily data from September 9th 1997 to March 15th 2015 imply that the jump component has a significant impact, and the risk of Iran’s stock returns includes both smoothly changing variance and jump events. Therefore, the traditional GARCH-M model cannot explain correctly the relationship between risk and return in Iran’s stock market. Also, the analysis of the time-varying risk premium shows that in the short-run only the risk arising from jump is significant.

Cites

معمای پرمیوم دارایی با توجه به ریسک حباب و تابع ترجیحات بازگشتی آپشتین - زین در بورس اوراق بهادار ایران

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APA: Copy

RASEKHI, SAEED, ASADI, SEYED PEYMAN, & SHEIDAEE, ZAHRA. (2016). THE RISK- RETURN RELATIONSHIP DYNAMICS OF IRAN'S STOCK MARKET: NEW EVIDENCE USING GARCH- JUMP MODEL. IRANIAN ECONOMIC RESEARCH, 21(66 ), 59-83. SID. https://sid.ir/paper/2603/en

Vancouver: Copy

RASEKHI SAEED, ASADI SEYED PEYMAN, SHEIDAEE ZAHRA. THE RISK- RETURN RELATIONSHIP DYNAMICS OF IRAN'S STOCK MARKET: NEW EVIDENCE USING GARCH- JUMP MODEL. IRANIAN ECONOMIC RESEARCH[Internet]. 2016;21(66 ):59-83. Available from: https://sid.ir/paper/2603/en

IEEE: Copy

SAEED RASEKHI, SEYED PEYMAN ASADI, and ZAHRA SHEIDAEE, “THE RISK- RETURN RELATIONSHIP DYNAMICS OF IRAN'S STOCK MARKET: NEW EVIDENCE USING GARCH- JUMP MODEL,” IRANIAN ECONOMIC RESEARCH, vol. 21, no. 66 , pp. 59–83, 2016, [Online]. Available: https://sid.ir/paper/2603/en

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