The Explanation of the Relationship between Downside Risk and Upside Risk combination in predicting Market Return Volatility
Subject Areas : Financial engineering
hossein rad kaftroudi
1
,
mohammadhasan gholizadeh
2
,
mahdi fadaei
3
1 - Department of management. rasht branch, Islamic Azad University, Rasht. Iran
2 - Department of management Faculty of Literature and Humanities. Guilan University. Rasht. Iran
3 - Department of management. rasht branch, Islamic Azad University, Rasht. Iran
Keywords: Downside risk, upside Risk, Forecasting Volatility of Market Returns, Vector Auto-Regression Model,
Abstract :
The volatility of financial returns plays an important role in many empirical applications, such as portfolio allocation, risk management and derivative pricing. The purpose of this research is to explain the relationship between undesirable risk and desirable risk in predicting market return volatility. The research is descriptive in nature and applied in purpose. The statistical population of the study is the companies listed in Tehran Stock Exchange and the target sample of the companies listed in the cement industry from which the required research data can be extracted. The research period is from 1392 to 1397. This research has a theoretical model and the self-regression model was used to test the hypotheses. In the cement industry, according to the t-statistic and its coefficient of determination, it is clear that the predictor of market yield fluctuations correlates with undesirable and desirable risk. Also, the adjusted coefficient of determination is 51%, which indicates this effect.
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