Iranian Journal of Economic Research

Revising the Dynamics of Financial Assets Price Bubbles (A Case Study of Tehran Stock Exchange)

Articles in Press

Document Type : Research Paper

Authors

Mohammad Feghhi Kashani 1
Teymor Mohammadi 2
zahra Aghighi 3

1 Department of Business Economics , Faculty of Economics , Allameh Tabatabai University

2 Department of Theoretical Economics,Faculty of Economics , Allameh Tabatabai University

3 ندارم

https://doi.org/10.22054/ijer.2024.78098.1263
Abstract
One of the key challenges in empirical studies relates to the identification of the dynamics of bubbles that periodically run up and collapse. This study is an attempt in this field, which initially examines some limitations of one of the relatively new methods in the economic literature as to the identification of rational bubbles in the Tehran Stock Exchange for the period of 2009-2020. Then, by assuming the Markov switching regime approach in this area, we have extended the conventional method by taking into account the dynamic interaction of asset prices in the market with the latent factor in the process of bubbles expansion and collapse. It is shown how this framework, while improving the efficiency of detecting financial bubbles through mitigating the specification error of dynamic models compared to existing alternative methods, is capable of incorporating the feature of traders' interactions in the market with no specific assumptions on how they interact, especially with regard to the coordination of their expectations and pursuant trading behavior. The findings resulting from this method indicate the existence of a bubble in asset prices only for the period 2018-2020, as opposed to the use of the conventional method, which implies either no bubble or the existence of two bubbly periods 2012-2014 and 2018-2020. in the Tehran Stock Exchange.

Keywords

Markov Switching Model
Rational Bubbles
Supremum Augmented Dickey-Fuller Method
Generalized Supremum Augmented Dickey-Fuller Method
Latent Factor
Subjects
Iranian Journal of Economic Research

Articles in Press, Accepted Manuscript
Available Online from 11 September 2024

  • Receive Date 04 February 2024
  • Revise Date 10 September 2024
  • Accept Date 02 September 2024
  • First Publish Date 11 September 2024

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