TY - JOUR ID - 25013 TI - Testing non-smooth Changes in Tehran Stock Exchange using Catastrophe Theory JO - Journal of Economic Research (Tahghighat- E- Eghtesadi) JA - JTE LA - en SN - 0039-8969 AU - mohmad, shapoor AU - Tabasi, Hamed AD - Y1 - 2012 PY - 2012 VL - 47 IS - 2 SP - 119 EP - 136 KW - Stock market crashes KW - Catastrophe Theory KW - Stochastic cusp catastrophe model KW - Bimodal distributions DO - 10.22059/jte.2012.25013 N2 - In this paper using catastrophe theory, we investigate non-smooth changes in Tehran stock exchange. Stock market crashes bring not only panic among investors, but also in deeper market lead to recession and decrease in consumer's confidence. As catastrophe theory is strong tool in explaining nonlinear phenomena, by applying stochastic cusp catastrophe model we examine sudden change in Tehran stock exchange index. Our results demonstrate that cusp model is better than alternative model. In fact, by applying annually liquidity growth and volume as control variable, cusp catastrophe model describes sudden decline in Tehran stock exchange index much more preferable than nonlinear logistic model in 2004 and 2008. Our result is robust after de-trending the index. JEL classification: G12; G14; C01; C53 UR - https://jte.ut.ac.ir/article_25013.html L1 - https://jte.ut.ac.ir/article_25013_66284c45c98fdd604dd8af341f7d9f0c.pdf ER -