The Role of Institutional Ownership in Mitigating Behavioral Market Volatility: Evidence from the Tehran Stock Exchange
Keywords:
Tehran Stock Exchange, Institutional ownership , market volatility, stock price synchronicity , evolutionary gameAbstract
This study aims to investigate the role of institutional ownership in mitigating behavioral market volatility by focusing on stock price synchronicity in the Tehran Stock Exchange. The research is applied and analytical. Data from 124 listed firms during 2016–2023 were analyzed using panel data regression models and evolutionary game simulations. The dependent variable was stock price synchronicity (R²), while independent variables included institutional ownership percentage, institutional trading volume, market return, and cost of capital. Investor behavior dynamics were modeled through replicator equations implemented in MATLAB. Regression results showed a significant negative effect of institutional ownership and trading volume on stock price synchronicity (p < 0.01). Cost of capital had a significant positive effect, while control variables such as firm size and stock liquidity were negatively associated with synchronicity. The evolutionary game model revealed that under conditions of high institutional ownership and low capital cost, analytical strategies became dominant, reducing imitative behavior. Sensitivity scenarios confirmed that institutional impact is conditional on structural and behavioral parameters. Institutional investors can help reduce behavioral volatility through enhancing analytical behavior and limiting emotional trading, provided that capital costs and behavioral sensitivity are appropriately managed. The integration of statistical and behavioral modeling in this study offers a comprehensive framework for understanding decision-making dynamics in emerging markets.
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