Study of Pricing Bubbles formation process in Tehran Stock Exchange (TSE): Applying of Markov Switching Method

The pricing bubble is one of the issues facing the capital markets, which occurs at different stages in the capital markets and with its emergence and fall, many changes occur in the capital markets and the situation of investors. This article seeks to investigate the bubble formation and its fall in the Tehran Stock Exchange using the State-Space Model of the Markov Switching Method. To investigate this issue, the space-state system, two models of Wu [۲۲], Campbell & Shiller [۴, ۵] have been used, which in one case considers bubble formation and in the other case bubble falling.The studied data were from April ۲۰۱۱ to September ۲۰۱۸ and on a daily basis, which was extracted from the archives of the Tehran Stock Exchange.The stock market has witnessed the bubble formation process a total of ۱۹ times in the period under review, so that in ۲۰۱۱, ۴ times, in May, December, February and March in ۲۰۱۲, ۵ times in May, July, October, November and February price bubble occurred. Also, in ۲۰۱۳, a price bubble occurred ۴ times, which included the months of May, July (۲ times), and January. This sequence for ۲۰۱۴, including once in March and in ۲۰۱۵, occurred twice in April and February. In ۲۰۱۶ and ۲۰۱۷, the price bubble did not occur, and in ۲۰۱۸, in June, July and August, there were ۳ price bubbles so far.

Keywords:

pricing bubble , Markov Switching , state-space model