Modeling the Factors Affecting Uncertainty in the Capital Market Using BMA-PTVPFAVAR Approaches

Articles in Press

Document Type : Original Article

Authors

1 Ph.D. Student in Economics, Department of Economics, Is.C., Islamic Azad University, Isfahan, Iran.

2 Associate Professor of Economics, Department of Economics, Shahid Chamran University of Ahvaz, Ahvaz, Iran.

3 Assistant Professor of Economics, Department of Economics, Is.C., Islamic Azad University, Isfahan, Iran

10.22075/jem.2025.36231.1970

Abstract

Traditional models lack sufficient capability in predicting investors’ portfolio returns due to model specification errors; therefore, this study aims to address model uncertainty issues. Accordingly, the objective of this research is to model the factors affecting uncertainty in the capital market. This is an applied research study. The statistical sample includes 171 listed companies on the stock exchange over the period 2011–2023. In this study, 62 risks affecting stock returns were incorporated into nonlinear Bayesian models. Based on the results of the BMA models, 13 non- fragile risks influencing stock returns were identified. According to the findings, interest rate lags, liquidity ratios, and oil revenues—having the highest probability of impact—are the most important risks affecting stock returns. The PTVPFAVAR model results indicate that the long-term elasticity between stock returns and the research variables is higher than the short-term elasticity, suggesting that these risks have a stronger influence on stock returns in the long run compared to the short term.

Keywords

Journal of Econometric Modelling

Articles in Press, Accepted Manuscript
Available Online from 28 May 2025

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