Validation and Development of Stock Return Synchronicity Measures and the Impact of the Country’s Economic Situation on its Changes

Document Type : Original Article

Authors
Mohsen Lotfi 1
Hamid Haghighat 2
M. Hossein Ghaemi 2
1 Ph.D Student of Accounting, Faculty of Social Sciences, Imam Khomeini International University, Qazvin, Iran (Corresponding Author)
2 Associate Professor of Accounting,Faculty of Social Sciences, Imam Khomeini International University, Qazvin, Iran
Abstract
This research was aimed at validating different models of stock return synchronicity and creating a new measure based on the classical synchronicity measure. The effect of the country's economic situation on stock return synchronization was also examined. For this purpose, 103 companies listed in the Tehran Stock Exchange during the years 2006 to 2015 were selected by systematic elimination method. This test showed that R-square based measures and the developed measure based on classical synchronicity measure were in a coherent way. Unexpectedly zero-return measure was in contrast to other criteria. Furthermore high correlation between the developed measure based on classical synchronicity measure and other coherent measures shows the reliability the proposed measure. The results of ANOVA test showed that Tehran Stock Exchange has experienced different levels of synchronicity in different economic conditions. In other words, high inflation (low) and low economic growth (high), the stock exchange has experienced the highest (minimum) synchronization. Also, ordinary least square and quantile regression analysis showed that economic growth changes (variations) had the greatest effect on stock return synchronicity changes, furthermore the effect of inflation rate and unemployment rate were not significant. On the other hand, comparison between this study and other international ones shows that Iran’s capital market is among the small synchronization markets.
 
 
Keywords
Stock return synchronicity
Classical synchronicity measure
R-square measure
Zero-return measure
and Macroeconomic factors
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