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Investigating Chaos in Tehran Stock Exchange Index

Author

Listed:
  • Ali Moeini

    (Assistant Prof. of Faculty of Engineering, University of Tehran)

  • Mehdi Ahrari

    (Research Assistant University of Tehran)

  • Saeed Sadat Madarshahi3

    (Master of business administration (MBA), Sprott school of business (Ottawa))

Abstract

Modeling and analysis of future prices has been hot topic for economic analysts in recent years. Traditionally, the complex movements in the prices are usually taken as random or stochastic process. However, they may be produced by a deterministic nonlinear process. Accuracy and efficiency of economic models in the short period forecasting is strategic and crucial for business world. Nonlinear models are efficient enough and suitable for short time forecasting. So notable attempts is devoted on understanding different economic time series’ and nonlinear dynamical models that can fit them. In this paper, it is tried to investigate Tehran stock exchange index time series. It is assumed. So, the Correlation Dimension (CD), the Hurst Exponent, and the Largest Lyapunov Exponent (LLE) of the time series are calculated. It is shown that the time series corresponding to Tehran stock Exchange index is nonlinear. The analyses of the results show enough evidence to accept the conjecture of existence chaotic behavior in Tehran stock exchange index.

Suggested Citation

  • Ali Moeini & Mehdi Ahrari & Saeed Sadat Madarshahi3, 2007. "Investigating Chaos in Tehran Stock Exchange Index," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 12(1), pages 103-120, winter.
    • Handle: RePEc:eut:journl:v:12:y:2007:i:1:p:103
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    References listed on IDEAS

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    1. Steven C. Blank, 1991. "“Chaos” in futures markets? A nonlinear dynamical analysis," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 11(6), pages 711-728, December.
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    3. Murray Frank & Thanasis Stengos, 1989. "Measuring the Strangeness of Gold and Silver Rates of Return," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(4), pages 553-567.
    4. Brock, William A. & Sayers, Chera L., 1988. "Is the business cycle characterized by deterministic chaos?," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 71-90, July.
    5. Chen Ping, 1996. "A Random Walk or Color Chaos on the Stock Market? Time-Frequency Analysis of S&P Indexes," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(2), pages 1-19, July.
    6. Chen, Shu-Heng & Lux, Thomas & Marchesi, Michele, 2001. "Testing for non-linear structure in an artificial financial market," Journal of Economic Behavior & Organization, Elsevier, vol. 46(3), pages 327-342, November.
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    Cited by:

    1. Adil Yilmaz & Gazanfer Unal, 2016. "Chaos in Fractionally Integrated Generalized Autoregressive Conditional Heteroskedastic Processes," Papers 1601.08099, arXiv.org, revised Feb 2016.

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