Price Bubbles in Tehran Stock Market: A Dynamic Stochastic General Equilibrium Model

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Asadi Ehsan; ZARE HASHEM; EBRAHIMI MEHRZAD; PIRAEE KHOSROW

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Paper Information

Journal: JOURNAL OF APPLIED THEORIES OF ECONOMICS Year:2019 | Volume:6 | Issue:2 Page(s): 73-100

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Title

Price Bubbles in Tehran Stock Market: A Dynamic Stochastic General Equilibrium Model

Author(s)

Asadi Ehsan | ZARE HASHEM | EBRAHIMI MEHRZAD | PIRAEE KHOSROW | Issue Writer Certificate

Keywords

Price bubblesQ1

DSGE modelQ1

Sentiment shockQ1

Real business cyclesQ1

Abstract

Although stock market bubbles play an important role in determining stock price and economic fluctuations, their explanation based on fundamental principles of the economy is a challenging task. The purpose of this paper is to identify the factors shaping the Price bubbles of the Tehran Stock Exchange according to a Bayesian DSGE model in the Real business cycles framework. Stock Price bubbles in this model appear endogenously as a positive feedback mechanism that is supported by optimistic beliefs. Based on the obtained results, the Sentiment shock was introduced as the most important source of bubbles fluctuations followed by fluctuations in the stock price. This shock reflects households’ beliefs about the relative size of bubbles and is passed to the real economy through credit constraints. This shock also expresses a large part of the fluctuations in output, consumption, and investment. Also, the labor supply shock and the investment-specific technology shock had a dominant role in creating employment and investment fluctuations, respectively.

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APA: Copy

Asadi, Ehsan, ZARE, HASHEM, EBRAHIMI, MEHRZAD, & PIRAEE, KHOSROW. (2019). Price Bubbles in Tehran Stock Market: A Dynamic Stochastic General Equilibrium Model. JOURNAL OF APPLIED THEORIES OF ECONOMICS, 6(2 ), 73-100. SID. https://sid.ir/paper/392392/en

Vancouver: Copy

Asadi Ehsan, ZARE HASHEM, EBRAHIMI MEHRZAD, PIRAEE KHOSROW. Price Bubbles in Tehran Stock Market: A Dynamic Stochastic General Equilibrium Model. JOURNAL OF APPLIED THEORIES OF ECONOMICS[Internet]. 2019;6(2 ):73-100. Available from: https://sid.ir/paper/392392/en

IEEE: Copy

Ehsan Asadi, HASHEM ZARE, MEHRZAD EBRAHIMI, and KHOSROW PIRAEE, “Price Bubbles in Tehran Stock Market: A Dynamic Stochastic General Equilibrium Model,” JOURNAL OF APPLIED THEORIES OF ECONOMICS, vol. 6, no. 2 , pp. 73–100, 2019, [Online]. Available: https://sid.ir/paper/392392/en

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