Compilation of the financial stress index in the stock exchange using the GHARCH-DCC approach

Document Type : Original Article

Authors

1 Financial engineering doctoral student, Qom Branch, Islamic Azad University, Qom, Iran

2 Assistant Professor, Department of Accounting, Qom Branch, Islamic Azad University, Qom, Iran

3 Associate Professor of Azad University, Tehran markaz branch, Tehran, Iran

4 Professor Assistant, Department of Accounting, Qom Branch, Islamic Azad University, Qom, Iran

10.30495/ijfma.2022.69008.1901

Abstract

The purpose of this research is to design a financial stress index to predict the occurrence of a financial crisis. In this research, a composite index has been designed to measure the financial system of Iran and the effects of financial turbulence in the conditions of uncertainty in the financial markets and the Tehran Stock Exchange between 2008 and 2020. Since shock variables were used in previous studies, in this study, the factors of currency volatility, stock market index volatility, banking industry volatility, coin price volatility, energy carrier volatility, and insurance industry volatility were used as variables in the final model. It was used, and three factors of currency volatility, stock market volatility, and banking industry volatility were used to design and construct the financial stress index. This research was conducted in five steps based on the DCC-GHARCH approach. Finally, based on the variables of financial institutions and the stock market index, a prediction model based on neural networks for the financial stress index was presented. From the results, we find that all the independent variables of the research have a positive and significant effect on the financial stress index, except for the coin price volatility index, which has a negative and significant impact.

Keywords

References

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International Journal of Finance & Managerial Accounting
Volume 10, Issue 36
January 2025
Pages 75-94

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