Risk and Return in the Tehran Stock Exchange

44 Pages Posted: 16 Sep 2011 Last revised: 15 Aug 2013

See all articles by Mohammad R. Jahan-Parvar

Mohammad R. Jahan-Parvar

Board of Governors of the Federal Reserve System

Hassan Mohammadi

Illinois State University; Economic Research Forum (ERF)

Date Written: April 18, 2013

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.

Keywords: Asymmetry, Conditional correlation, Conditional skewness, Efficiency, Emerging and frontier markets, Granger causality, ICAPM, Markov switching, Volatility

JEL Classification: C22, C32, G12, G15

Suggested Citation

Jahan-Parvar, Mohammad R. and Mohammadi, Hassan, Risk and Return in the Tehran Stock Exchange (April 18, 2013). The Quarterly Review of Economics and Finance, Volume 53, Issue 3, August 2013, Pages 238-256, ISSN 1062-9769 . Available at SSRN: https://ssrn.com/abstract=1927646 or http://dx.doi.org/10.2139/ssrn.1927646

Mohammad R. Jahan-Parvar (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://sites.google.com/site/mrjahan/

Hassan Mohammadi

Illinois State University ( email )

Normal, IL 61790
United States

Economic Research Forum (ERF) ( email )

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Dokki, Cairo
Egypt

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