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Risk and return in the Tehran stock exchange

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  • Jahan-Parvar, Mohammad R.
  • Mohammadi, Hassan

Abstract

This paper analyzes market index returns in the Tehran stock exchange (TSE) within the context of three variants of the Capital Asset Pricing Model: the static international; the constant-parameter intertemporal; and a Markov-switching intertemporal CAPM, which allows for time-varying degree of integration with regional and international equity markets. We find that TSE returns are CAPM-efficient at monthly frequency with respect to several international market indices. Moreover, we find evidence in support of international integration of the TSE with respect to international markets. In addition, we conduct an extensive investigation for the direction of causality between TSE returns, international market index returns, and those in neighboring countries.

Suggested Citation

  • Jahan-Parvar, Mohammad R. & Mohammadi, Hassan, 2013. "Risk and return in the Tehran stock exchange," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(3), pages 238-256.
  • Handle: RePEc:eee:quaeco:v:53:y:2013:i:3:p:238-256
    DOI: 10.1016/j.qref.2013.05.005
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    1. repec:eee:jbfina:v:82:y:2017:i:c:p:1-19 is not listed on IDEAS
    2. repec:eee:quaeco:v:66:y:2017:i:c:p:275-293 is not listed on IDEAS

    More about this item

    Keywords

    Conditional correlation and skewness; Efficiency; Emerging and frontier markets; ICAPM; Integration and segmentation;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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