Using the monthly data of the returns of 5 assets during 05/31/2011 to 02/28/2021, the volatilities of Iranian asset markets have been modeled in this paper. Factor multivariate stochastic volatility model in the framework of space-state approach is the basis for decomposing the asset market volatility into two components, “volatility rooted in latent factors” and “idiosyncratic volatility” and estimating time-varying covariance matrix and dynamic pair-wise correlation of time series. The findings reveal that: first, there are two latent factors. Second idiosyncratic volatilities of 3 assets, including stock, dollar and gold have increased since mid-2017, and emerges evidence of clustering behavior. Third, the volatility of inflation is explained by the hidden factors, and consequently the idiosyncratic volatility is almost smooth. Fourth, the volatility of stock return is highly correlated with the volatilities of inflation and dollar. In addition, there is a significant pairwise correlation between inflation-dollar and inflation-interest rate.
Taleblou, R., & Mohajeri, P. (2021). Modeling the Volatility of the Iranian Asset Markets Using Factor Multivariate Stochastic Volatility Model. Journal of Econometric Modelling, 6(3), 63-96. doi: 10.22075/jem.2021.23659.1607
MLA
reza Taleblou; Parisa Mohajeri. "Modeling the Volatility of the Iranian Asset Markets Using Factor Multivariate Stochastic Volatility Model", Journal of Econometric Modelling, 6, 3, 2021, 63-96. doi: 10.22075/jem.2021.23659.1607
HARVARD
Taleblou, R., Mohajeri, P. (2021). 'Modeling the Volatility of the Iranian Asset Markets Using Factor Multivariate Stochastic Volatility Model', Journal of Econometric Modelling, 6(3), pp. 63-96. doi: 10.22075/jem.2021.23659.1607
VANCOUVER
Taleblou, R., Mohajeri, P. Modeling the Volatility of the Iranian Asset Markets Using Factor Multivariate Stochastic Volatility Model. Journal of Econometric Modelling, 2021; 6(3): 63-96. doi: 10.22075/jem.2021.23659.1607
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