Portfolio Management in Bullish and Bearish Stock Markets: An Application of the Asymmetric TVP-VAR in Selected Larg Industries
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

Portfolio Management in Bullish and Bearish Stock Markets: An Application of the Asymmetric TVP-VAR in Selected Larg Industries

Document Type : Original Article

Authors
manizheh ramsheh 1
soheil rudari 2
Mohammad Ershad Emami Alagha 3
Ali Mohammad Ahmadi 4
Mohaddese Yousefi 5
1 Assistant Prof., Department of Accounting, Faculty of Economics and Administrative Sciences, University of Qom, Qom, Iran
2 PhD in Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran
3 Master of Sciene in Finance and Economics, Università degli Studi di Milano, Milan, Italy
4 Assistant Professor, Economic Research Institute, Tarbiat Modares University, Tehran, Iran
5 Master of Sciene in Accounting, Faculty of Economics and Administrative Sciences, University of Qom, Qom, Iran
10.22034/jse.2024.12408.2254
Abstract
Given the risk spillovers among sector groups of the Tehran Stock Exchange (TSE), the portfolio optimization necessitates a through examination of the inter-sectoral connectedness and the ways in which industries influence each other. Consequently, this research aims to study the inter-sectoral connectedness among six principal industry groups of the TSE during bull, bear, and general market conditions over time, and to formulate optimal portfolios employing MVP, MCP, and MCoP. This study, which utilizes daily data for the selected industries from September 21, 2013, to October 2, 2023, applies the Asymmetric TVP-VAR model to obtain results. The findings unveil an asymmetric connectedness in bull and bear volatilities, with a heightened intensity of connectedness in bear market. Additionally, the character and intensity of this connectedness have evolved over time, in such a way that this connectedness has intensified over recent years. The Oil industry has played the leading role of the market in two general and bullish states, and the chemical industry has played this role in the bearish state. On the other hand, the automobile industry has been a risk accepter in all three cases. On the other hand, the automotive industry has been a risk accepter in all three cases. Examining the relationship between two industries indicates that the role of industries as net senders and receivers of risk has been variable over time. Furthermore, this research examines the optimal portfolio weights, hedging effectiveness, and the cumulative portfolio return, taking into account the three aforementioned criteria.
Keywords
Inter-sector connectedness
Bull market
Bear market
Optimal investment portfolio
MCoP
Subjects
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Quarterly Journal of Securities Exchange
Volume 17, Issue 67
Autumn 2024
Pages 49-84