The Analysis of the Tehran Stock Exchange Index in the Framework of Markov Chains

Document Type : Original Article

Authors

1 Assistant Prof, Department of Industrial Management, Islamic Azad University of Dehaghan Branch, Isfahan, Iran .

2 MSc in Industrial Engineering, Islamic Azad University of Dehaghan Branch, Isfahan, Iran.

Abstract

Markov chains as a special kind of random processes such that the future status of process is dependent on current status, has many applications in industry, biology, finance, etc. The Markov Chain Analysis framework provides answers to questions that may not be appropriate in other analytical frameworks such as fundamental, technical, and time series. This study with two different methods show that two week rate of return (fourteen days) of Tehran Stock Exchange Index is a markov chain in a state space consists of six status and defined on the basis of return and risk. The average time to transfer between the state space is also between 4 to 13 days, and also the maximum amount of probability (which represents the long-term behavior of the process) relates to a situation in which the return is greater than average.

Keywords

References

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