Detection Model of Stock Price Crashes

Document Type : Research Paper

Authors

1 PhD student .in Accounting, Economics and Accounting College, Department of Accounting, Islamic Azad University, South Tehran Branch, Tehran, Iran.

2 Associate Professor, Economics and Accounting College, Department of Accounting, Islamic Azad University, South Tehran Branch, Tehran, Iran.

3 Assistant Professor, Economics and Accounting College, Department of Accounting, Islamic Azad University, South Tehran Branch, Tehran, Iran.

Abstract

 
The stock price crash (SPC) is associated with profitability as the most important goal of investing. Any increase in the phenomenon of SPC has raised the pessimism of investors in investing in the stock market, and this can ultimately lead to the withdrawal of resources from the stock market. The SPC can be a big, negative, sudden and unusual change in stock returns that occurs in the absence of an important economic event. The purpose of this study is to review and provide an on-line SPC detection model that is consistent with the definitions and theories. In so doing, 49559 monthly specific returns of 299 companies listed on the Tehran Stock Exchange (TSE) were investigated from July 1992 to April 2018. As a result, an on-line model for SPC detection was presented based on Likelihood Ration (LR) and consistent with the agency theory. In this model, the Local Generalized Likelihood Ratio (LGLR) was used for detection of abrupt changes in the trend of specific returns. The results of this study showed that the proposed model was capable of SPC detection

Keywords

References

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Financial Management Strategy
Volume 9, Issue 2 - Serial Number 33
August 2021
Pages 177-156

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History

  • Receive Date: 05 September 2018
  • Revise Date: 01 March 2019
  • Accept Date: 03 March 2019

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