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
mohmad, S., & Tabasi, H. (2012). Testing non-smooth Changes in Tehran Stock Exchange using Catastrophe Theory. Journal of Economic Research (Tahghighat- E- Eghtesadi), 47(2), 119-136. doi: 10.22059/jte.2012.25013
MLA
shapoor mohmad; Hamed Tabasi. "Testing non-smooth Changes in Tehran Stock Exchange using Catastrophe Theory", Journal of Economic Research (Tahghighat- E- Eghtesadi), 47, 2, 2012, 119-136. doi: 10.22059/jte.2012.25013
HARVARD
mohmad, S., Tabasi, H. (2012). 'Testing non-smooth Changes in Tehran Stock Exchange using Catastrophe Theory', Journal of Economic Research (Tahghighat- E- Eghtesadi), 47(2), pp. 119-136. doi: 10.22059/jte.2012.25013
VANCOUVER
mohmad, S., Tabasi, H. Testing non-smooth Changes in Tehran Stock Exchange using Catastrophe Theory. Journal of Economic Research (Tahghighat- E- Eghtesadi), 2012; 47(2): 119-136. doi: 10.22059/jte.2012.25013
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