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Selecting an Appropriate Model to Study the Transmission Volatility between the Financial Markets of Selected Islamic Oil Exporting Countries

Zinat Zakeri (), Abbas Shakeri () and Teimoor Mohammadi ()
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Zinat Zakeri: Ph.D. Candidate in Economics, University of Allameh Tabataba'i
Abbas Shakeri: Professor of Economics, University of Allameh Tabataba'i
Teimoor Mohammadi: Associate Professor of Economics, University of Allameh Tabataba'i

Quarterly Journal of Applied Theories of Economics, 2020, vol. 7, issue 3, 1-24

Abstract: In recent years, with the expansion of the globalization process, the relationship between the financial markets of different countries, including developing countries such as OPEC oil-exporting islamic countries, has increased more than ever, resulting in modeling the volatility of returns in international stock markets in terms of science. finance has become an important issue. the importance of this issue in risk management is the pricing of financial derivatives and the coverage of the resulting risk, marketing and selection of financial portfolios. experimental results show that the modeling of transmission volatility is very important in obtaining the results of the presence or absence of transmission volatility between different financial markets. accordingly, in the present paper, two approaches of multivariate dynamic conditional correlation (DCC) and multivariate factor stochastic volatility in modeling transmission volatility between selected markets using the risk value and calculating the loss function are compared. to obtain experimental results from stock price index data in the financial markets of five selected islamic and oil countries, including Iran, Saudi Arabia, UAE, Qatar and Nigeria with daily frequency during the period 12/05/2008 to 19/02/2020 used. experimental results of Kupiec and christoffersen tests show that both approaches can be used to calculate the risk value, but due to the comparison of loss functions, the multivariate factor stochastic volatility modeling approach compared to the GARCH approach of dynamic correlation (DCC) multivariate is preferred.

Keywords: Transmission volatility; Factor stochastic volatility model; Multivariate GARCH modle; Islamic oil countries (search for similar items in EconPapers)
JEL-codes: G11 G14 G15 (search for similar items in EconPapers)
Date: 2020
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