Estimation of the Financial Market Crash Rate Model in Iran with an Emphasis on the Dynamic Behaviors of the Free Float Stock Index and Dividend Yield
Keywords:
Financial market crash rate, Dynamic behaviors, Free float stock index, Cash return, Industry indexAbstract
It can be confidently stated that sudden crashes in financial markets over the past hundred years have been among the most significant events in human societies—events that, in addition to inflicting substantial losses on a vast group of investors, have led to major decisions. The occurrence of recent global financial crises and the subsequent abrupt collapse in stock prices of companies in financial markets, which caused significant losses for numerous investors, has attracted the attention of many financial researchers and scholars toward the topic of financial market crashes and their prediction. The sharp decline in financial market prices causes substantial losses to investors’ wealth and undermines their trust in capital markets. This study investigates the estimation of the financial market crash rate model in Iran, with an emphasis on the dynamic behaviors of the free float stock index and dividend yield, using time series econometrics. The study period spans from 1996 to 2023 in Iran. The model estimation was conducted using the Autoregressive Distributed Lag (ARDL) technique. This study is applied in its objective and descriptive-analytical in nature, and it falls under the category of ex post facto research. According to the results of the model estimation, the coefficient of the free float stock index is −0.173730, with a corresponding p-value of 0.0046, indicating a statistically significant impact at the 95% confidence level on the financial market crash rate in Iran during the study period. The coefficient of the dividend yield index in the model is −0.213467, with a corresponding p-value of 0.0061, demonstrating that the dividend yield index also has a statistically significant impact on the financial market crash rate in Iran within a 5% error margin. The coefficients of the variables for the Top 50 Companies Index, the Financial Index, and the Industry Index (with one lag) are −0.949789, −0.755780, and −0.514797, respectively. The associated p-values are 0.0018, 0.190, and 0.0212, respectively, indicating that these variables also exert a negative and significant impact on the financial market crash rate in Iran at a 95% confidence level.
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Copyright (c) 2024 Masoomeh Darabi (Author); Gholamreza Zomordian (Corresponding author); Bahman Banimahd, Mirfiz Fallah Shams (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
