Iranian Journal of Economic Research

Comparative study of the instability and dynamics of systematic risk for Tehran Stock Exchange and a selected group of emerging stock markets

Authors

Esmaeel Ramazanpoor
Mohammad Hassan Gholizadeh
Abbas Kalantary
Abstract
This study investigates the stability of systematic risk of Tehran stock Exchange and a selected group of emerging stock markets including of Latin America, Asian South eastern and Istanbul Stock Exchange. The study uses time series specification of CAPM model (Black et al, 1972) and employs Bai and Perron (2003) structural break point test. The results show that based on Bai and Perron test, there are evidences of structural break in time series CAPM model and hence the instability in systematic risk for Brazil, Chile, Thailand, China, Malaysia and Tehran stock markets. The dynamic estimation results of systematic risk of these stock markets based on MGARCH - BEKK model indicate that, Tehran Stock Exchange has lowest level of systematic risk among other stock markets. The results show that there is significant fluctuation in dynamic trend of systematic risk of these stock markets in particular around structural break point dates. Based on the results, the BEKK model has more accurate performance than linear time series CAPM model for systematic risk forecasting proposes. These results provide useful policy guideline for investors in international risk management.

Keywords

CAPM model
stability of systematic risk
emerging stock markets
BEKK-MGARCH model
dynamic estimation of systematic risk

  • Receive Date 17 December 2014
  • First Publish Date 17 December 2014

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