IDEAS home Printed from https://ideas.repec.org/a/eut/journl/v19y2015i3p341.html
   My bibliography  Save this article

Analysis of the Behavior of Amateur and Professional Investors’ Impact on the Formation of Bubbles in Tehran Stock Market

Author

Listed:
  • Siab Mamipour

    (Department of Economics, University of Kharazmi, Tehran, Iran.)

  • Mahshid Sepahi

    (Department of Economic and Social Systems, University of Kharazmi, Tehran, Iran)

Abstract

The presence of bubbles in the markets and its formation has been regarded by economists and they have been looking to develop methods that can be recognized by using appropriate method for the formation of bubbles. In this paper, first, the formation of bubbles is tested using the new unit root test known as Phillips test (Generalized Sup ADF test) for 50 companies in the Tehran Stock Exchange during the period of August 2011 to March 2013, and periods of bubble is shown by one and zero if otherwise. Then, the behavior of amateur and professional investors’ impact on the probability of the formation of speculative bubbles in the Tehran Stock is investigated and estimated using Panel Data Models for Binary Choice (Logit) model. Phillips test shows that 49 companies from 50 samples of Tehran Stock Exchange at different periods of time have experienced price bubbles. The results of the Panel Logit regression model indicate that the impact of trading amateur investors on the probability of the formation of speculative bubbles is different from the behavior of institutional or professional investors. That purchase and sale of amateur investors, with respect to trading of professional investors, increases the probability of bubble formation and it can be one of the main factors affecting the formation of bubbles in the stock market. Also, the results show that the P/E ratio and speed of turnover also increases the formation of bubbles, while company size as an index scale enterprises, leading to decline the possibility of a bubble in the stock market.

Suggested Citation

  • Siab Mamipour & Mahshid Sepahi, 2015. "Analysis of the Behavior of Amateur and Professional Investors’ Impact on the Formation of Bubbles in Tehran Stock Market," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 19(3), pages 341-358, Autumn.
    • Handle: RePEc:eut:journl:v:19:y:2015:i:3:p:341
    as

    Download full text from publisher

    File URL: ftp://80.66.179.253/eut/journl/20153-6.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter C. B. Phillips & Shuping Shi & Jun Yu, 2014. "Specification Sensitivity in Right-Tailed Unit Root Testing for Explosive Behaviour," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(3), pages 315-333, June.
    2. repec:bla:jfinan:v:53:y:1998:i:5:p:1563-1587 is not listed on IDEAS
    3. Peter C. B. Phillips & Shu-Ping Shi & Jun Yu, 2011. "Testing for Multiple Bubbles," Working Papers CoFie-03-2011, Singapore Management University, Sim Kee Boon Institute for Financial Economics.
    4. Peter C. B. Phillips & Yangru Wu & Jun Yu, 2011. "EXPLOSIVE BEHAVIOR IN THE 1990s NASDAQ: WHEN DID EXUBERANCE ESCALATE ASSET VALUES?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 201-226, February.
    5. Li LIN & Ruo En REN & Didier SORNETTE, 2009. "A Consistent Model of ‘Explosive’Financial Bubbles With Mean-Reversing Residuals," Swiss Finance Institute Research Paper Series 09-14, Swiss Finance Institute.
    6. Engsted, Tom & Tanggaard, Carsten, 2001. "A New Test for Speculative Bubbles Based on Return Variance Decompositions," Finance Working Papers 01-9, University of Aarhus, Aarhus School of Business, Department of Business Studies.
    7. Jiang, Zhi-Qiang & Zhou, Wei-Xing & Sornette, Didier & Woodard, Ryan & Bastiaensen, Ken & Cauwels, Peter, 2010. "Bubble diagnosis and prediction of the 2005-2007 and 2008-2009 Chinese stock market bubbles," Journal of Economic Behavior & Organization, Elsevier, vol. 74(3), pages 149-162, June.
    8. Peter C. B. Phillips & Shu-Ping Shi & Jun Yu, 2011. "Specification Sensitivity in Right-Tailed Unit Root Testing for Explosive Behavior," Working Papers 15-2011, Singapore Management University, School of Economics.
    9. L. Lin & Ren R. E & D. Sornette, 2009. "A Consistent Model of `Explosive' Financial Bubbles With Mean-Reversing Residuals," Papers 0905.0128, arXiv.org.
    10. Beltratti, A. & Morana, C., 2006. "Breaks and persistency: macroeconomic causes of stock market volatility," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 151-177.
    11. Shiller, Robert J., 1978. "Rational expectations and the dynamic structure of macroeconomic models : A critical review," Journal of Monetary Economics, Elsevier, vol. 4(1), pages 1-44, January.
    12. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-1088, October.
    13. Eugene N. White, 2004. "Bubbles and Busts: The 1990s in the Mirror of the 1920s," FRU Working Papers 2004/09, University of Copenhagen. Department of Economics. Finance Research Unit.
    14. L. Lin & Ren R.E. & D. Sornette, "undated". "A Consistent Model of `Explosive' Financial Bubbles With Mean-Reversing Residuals," Working Papers CCSS-09-002, ETH Zurich, Chair of Systems Design.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leone, Vitor & de Medeiros, Otavio Ribeiro, 2015. "Signalling the Dotcom bubble: A multiple changes in persistence approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 77-86.
    2. Yongheng Deng & Eric Girardin & Roselyne Joyeux & Shuping Shi, 2017. "Did bubbles migrate from the stock to the housing market in China between 2005 and 2010?," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 276-292, August.
    3. KIRKPINAR, Aysegul & ERER, Elif & ERER, Deniz, 2019. "Is There A Rational Bubble In Bist 100 And Sector Indices?," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 23(3), pages 21-33, September.
    4. Fantazzini, Dean, 2016. "The oil price crash in 2014/15: Was there a (negative) financial bubble?," Energy Policy, Elsevier, vol. 96(C), pages 383-396.
    5. Zhao, Yanping & Chang, Hsu-Ling & Su, Chi-Wei & Nian, Rui, 2015. "Gold bubbles: When are they most likely to occur?," Japan and the World Economy, Elsevier, vol. 34, pages 17-23.
    6. Petr Geraskin & Dean Fantazzini, 2013. "Everything you always wanted to know about log-periodic power laws for bubble modeling but were afraid to ask," The European Journal of Finance, Taylor & Francis Journals, vol. 19(5), pages 366-391, May.
    7. Michaelides, Panayotis G. & Tsionas, Efthymios G. & Konstantakis, Konstantinos N., 2016. "Non-linearities in financial bubbles: Theory and Bayesian evidence from S&P500," Journal of Financial Stability, Elsevier, vol. 24(C), pages 61-70.
    8. Glaser, Florian & Panz, Sven, 2016. "(Pro?)-cyclicality of collateral haircuts and systemic illiquidity," ESRB Working Paper Series 27, European Systemic Risk Board.
    9. Kräussl, Roman & Lehnert, Thorsten & Martelin, Nicolas, 2016. "Is there a bubble in the art market?," Journal of Empirical Finance, Elsevier, vol. 35(C), pages 99-109.
    10. Etienne, Xiaoli L. & Irwin, Scott H. & Garcia, Philip, 2014. "Bubbles in food commodity markets: Four decades of evidence," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 129-155.
    11. Congregado, Emilio & Esteve, Vicente, 2022. "Cointegration with structural changes and classical model of inflation in Spain, 1830–1998," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 376-388.
    12. Rafael Emilio Congregado & Vicente Esteve, 2021. "Long-run neutrality of money and inflation in Spanish economy, 1830-1998," Working Papers 2104, Department of Applied Economics II, Universidad de Valencia.
    13. Jerome L Kreuser & Didier Sornette, 2017. "Super-Exponential RE Bubble Model with Efficient Crashes," Swiss Finance Institute Research Paper Series 17-33, Swiss Finance Institute.
    14. Binge, Laurie H. & Boshoff, Willem H., 2021. "Measuring alternative asset prices in an emerging market: The case of the South African art market," Emerging Markets Review, Elsevier, vol. 47(C).
    15. Tolhurst, Tor N., 2018. "A Model-Free Bubble Detection Method: Application to the World Market for Superstar Wines," 2018 Annual Meeting, August 5-7, Washington, D.C. 274387, Agricultural and Applied Economics Association.
    16. Yang Hu, 2023. "A review of Phillips‐type right‐tailed unit root bubble detection tests," Journal of Economic Surveys, Wiley Blackwell, vol. 37(1), pages 141-158, February.
    17. Christie Smith & Aaron Kumar, 2018. "Crypto‐Currencies – An Introduction To Not‐So‐Funny Moneys," Journal of Economic Surveys, Wiley Blackwell, vol. 32(5), pages 1531-1559, December.
    18. Janusz Sobieraj & Dominik Metelski, 2021. "Testing Housing Markets for Episodes of Exuberance: Evidence from Different Polish Cities," JRFM, MDPI, vol. 14(9), pages 1-29, September.
    19. Phillips, Peter C.B. & Lee, Ji Hyung, 2016. "Robust econometric inference with mixed integrated and mildly explosive regressors," Journal of Econometrics, Elsevier, vol. 192(2), pages 433-450.
    20. Peter C. B. Phillips & Shuping Shi & Jun Yu, 2015. "Testing For Multiple Bubbles: Limit Theory Of Real‐Time Detectors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(4), pages 1079-1134, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eut:journl:v:19:y:2015:i:3:p:341. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: [z.rahimalipour] (email available below). General contact details of provider: https://edirc.repec.org/data/fecutir.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.