Estimation of Risk Hedge Ratio, Optimal Weight and Volatility Spillover Effects in the Stock Market of Iran, USA, Turkey, and UAE

Abounoori, Esmaiel; Tour, Mansour

doi:10.22054/ijer.2019.11688

Document Type : Research Paper

Authors

Esmaiel Abounoori ¹
Mansour Tour ²

¹ Professor of Economics, Semnan University, Semanan, Iran

² Ph.D. Student in Economics, Semnan University, Semanan, Iran

https://doi.org/10.22054/ijer.2019.11688

Abstract

Information about optimal risk hedge ratio, optimal weight of asset portfolios, the intensity and direction of impact of shock and volatility on financial markets is important for investment, policy, risk management and development of financial markets. In this study, to examine risk hedge ratio, optimal weight of asset and the volatility spillover among Iran, the United States, Turkey and UAE stock markets, multivariate GARCH model is estimated using the weekly stock index data from December 15, 2008 to April 10, 2017. Independence of Iran stock market from other markets is due to the relatively low volatility of the Iran stock market and the insignificant correlation between the Iran market and other markets, so risk hedge ratio and optimal weight of assets between the stock market of the studied countries and Iran is low. Also the results indicate considerable own ARCH and GARCH effects on the stock market of these countries. The US economy is relatively large, thus other markets have no significant effect on this market as expected. Most of the eigenvalues of the ARCH and GARCH effects matrix has been slightly smaller than unit, which indicates that relative stability in these markets has been low against domestic and foreign shock and volatility.

Keywords

References

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Iranian Journal of Economic Research

Estimation of Risk Hedge Ratio, Optimal Weight and Volatility Spillover Effects in the Stock Market of Iran, USA, Turkey, and UAE

References

References

Volume 24, Issue 81 - Serial Number 81
February 2020
Pages 135-156

Estimation of Risk Hedge Ratio, Optimal Weight and Volatility Spillover Effects in the Stock Market of Iran, USA, Turkey, and UAE

References

References

Volume 24, Issue 81 - Serial Number 81February 2020Pages 135-156

Volume 24, Issue 81 - Serial Number 81
February 2020
Pages 135-156