An Equilibrium Model for Stochastic Simulation of Iranian Stock Market Behavior: An Econophysic Approach

Document Type : Research Paper

Authors

1 Department of Economic, Faculty of Economic and Management, Shiraz Branch, Islamic Azad University

2 Young Researchers and Elite Club, Shiraz Branch, Islamic Azad University, Shiraz, Iran University

Abstract

This study attempts to cross borders and disciplines of traditional approaches using interdisciplinary sciences to make the mental models of Iran's capital market applicable. Hence, this study using a variety of sciences in the context of financial discussions, presents an equilibrium theoretical framework in the stock market. The research method used a randomized dynamic path mapper within the framework of the Black Scholes model to simulate the stock price index of Tehran stock exchange behavior. Thus, the daily time series data of the stock price index has been used since December 2008 to August of 2017. The results indicate that simulation of long-term trend is provided to some extent. Although the model is excused of forecasting the crisis and volatilities along the period, the results of comparison test suggest that simulated data distribution forms are very close to actual data. In addition, laboratory results indicate that the decrease in risk aversion parameter and the ratio of liquidity to the shares held by investors make the simulated price index curve shift upward and downward respectively

Keywords

References

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Financial Management Strategy
Volume 6, Issue 2 - Serial Number 21
September 2018
Pages 82-113

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History

  • Receive Date: 18 February 2017
  • Revise Date: 15 May 2018
  • Accept Date: 26 June 2018

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