The Effect of Individual and Legal Persons¡¯ Trading on Creation of Price Bubble in Tehran Stock Exchange (TSE) Market

Mir Feyz Fallahshams, Meysam Alimohammadi, Hamidreza Kordlouie and Nader Naghshineh

Applied Economics and Finance, 2014, vol. 1, issue 2, 21-29

Abstract: This paper examines the effect of transactions carried out by legal persons or individuals on the formation of price bubbles for the companies listed in Tehran Exchange Market (TSE). At first through such tests as rows, skewness, stretching, and duration dependence, it was found out that price bubbles were formed in TSE in the span of time between May 2012 and November 2012. In this period, the prices were studied day by day, as well as in 5-minute time series. After doing bubble detection tests, the researchers divided the sampled companies under two categories of companies speculated to have bubbles and companies without bubbles. The study continued with investigating the effect of the behavior of individuals and legal persons on the formation of price bubbles. In so doing, their data on the transactions of individuals and legal persons were provided in 5-minute time series. The binary logit regression model was then put to use so to find out the effect size of these groups according to the data available. The findings of the fitting procedure for this study show that individuals have a bigger effect on bubbles that legal persons in the same span of time.

Keywords: Tehran Stock Exchange Market (TSE); Price bubble; individual and legal person trading; Market Efficiency; Rows Test; Stock Exchange Market (SEM); Stock Exchange (SE) (search for similar items in EconPapers)
Date: 2014
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