Document Type : Research Paper

Authors

• Mohammad Asim ¹
• Mahdi Sadidi ²
• Mohammad Hassan Ebrahimi Sarvolia ²

¹ PhD Student in Financial Management, Allameh Tabataba'i University, Tehran, Iran

² Assistant Professor, Faculty Member, Allameh Tabataba'i University, Tehran, Iran

Abstract

The pricing bubble is one of the issues facing the capital markets, which occurs at different stages in the capital markets and with its emergence and fall, many changes occur in the capital markets and the situation of investors. This article seeks to investigate the bubble formation and its fall in the Tehran Stock Exchange using the State-Space Model of the Markov Switching Method. To investigate this issue, the space-state system, two models of Wu [22], Campbell & Shiller [4, 5] have been used, which in one case considers bubble formation and in the other case bubble falling.The studied data were from April 2011 to September 2018 and on a daily basis, which was extracted from the archives of the Tehran Stock Exchange.The stock market has witnessed the bubble formation process a total of 19 times in the period under review, so that in 2011, 4 times, in May, December, February and March in 2012, 5 times in May, July, October, November and February price bubble occurred. Also, in 2013, a price bubble occurred 4 times, which included the months of May, July (2 times), and January. This sequence for 2014, including once in March and in 2015, occurred twice in April and February. In 2016 and 2017, the price bubble did not occur, and in 2018, in June, July and August, there were 3 price bubbles so far.

Keywords

• pricing bubble
• Markov Switching
• state-space model