The Effect of Price Changes in the Short-Term Trades In Tehran Stock Exchange

Transcription

1 Ausralian Journal of Basic and Applied Sciences, 7(2): , 213 ISSN The Effec of Price Changes in he Shor-Term Trades In Tehran Sock Exchange Hoda Aminian School of Mahemaics and Compuer Sciences, Amirkabir Uniersiy of Technology (AUT), 424 Hafez Ae., Thehran, Iran Absrac: The relaionship beween he number of ransacions, price changes and sock reurns are opics ha hae been of ineres o economic and financial researchers since 195. Sock Marke and Capial Marke are young markes in Iran, bu someimes, some raders use he moions of ransacion or he price changes for immediae and shor-erm decisions and consider i as he resul of news and informaion ha hey were probably no aware of. This sudy examined he relaionships of oal ransacions wih price changes and sock reurns. The research sample includes firms lised in Tehran Sock Exchange. This sudy consised of four hypoheses which used Pearson's correlaion, and Kolmogoro Smirno es is used o es he normaliy of daa. According o he resuls, research hypoheses hae been approed wih confidence leel of %95 and he significan correlaion beween he number of companies rading, and a sock reurn has been esed. Key words: number of rades, Sock reurns, price changes, he behaior of inesors, securiy of rades, alue of rades INTRODUCTION Sock marke is a place for wo classes of inesors. One class includes suppliers and anoher class includes appliers. The expecaions of hese wo classes in one spo indicae he differences and similariies of inesors' expecaions oward a sock in he fuure. When appliers hae more posiie expecaions, hen sock prices may also be higher. The reason for he difference beween inesor s expecaions oward a sock in he fuure is relaed o he inerpreaion of he daa by inesors. Some inesors may hae a good inerpreaion from some news while ohers may hae bad inerpreaions of ha news. Therefore he inerpreaion of daa can hae ery differen effecs on he sock price. I can be concluded ha he daa enry and Sakeholders behaiors can be essenial in deermining he price and he sock price changes. The changes in Sakeholders behaiors are found in he olume of rades or he number of rades in a day. High ariaion in he size and number of rades reflecs differences in he shareholder expecaions and herefore could be faced wih significan price changes. The main purpose of he presen sudy is furher undersanding he menaliy of he Tehran Sock Exchange and shareholders behaior in he marke. Reiew of Lieraure: According o Karpo (1987) here are a leas four reasons for he imporance of he relaion of rading olume and sock price: 1. Some models are discussed in financial markes which anicipae he relaionship beween rading olume and sock price due o he amoun of daa enry ino he marke, how o spread informaion, as lised ransacions for shor-erm marke condiions. So clarifying he relaionship beween rading olume and sock reurns hrough a ariey of ess, makes he iews clear regarding he financial markes and idenifying (discriminae) differen assumpions abou marke srucure. 2. The knowledge of he relaionship beween he number of ransacions and sock price which use he combinaion of daa on he number of deals and heir prices for heir inerpreaions is so imporan. Deermining he ransacion price and olume increase he diagnosic power of such ess. In oher ess, he price changes are influenced by marke aluaion news bu changes in he ransacion olume mean he agreemen or disagreemen of raders on high qualiy of he new informaion. In any case, proiding a es and he alidiy of he resuls depends on he oin disribuion of price olailiy and rading olume. 3. The relaionship beween sock prices and rading olume and number of issues relaed o he empirical disribuion of speculaie prices is essenial. In a period when he daa is sampled a inerals such as daily, he rae of reurn compared wih he normal disribuion has a more sreched disribuion. I could also be due o he disribuion of raes of reurn assumpion wih infinie ariance and can also be due o he differen disribuion of he saisics produced by differen ariances. (Hypoheses of combining disribuion or MDH) Corresponding Auhor: Hoda Aminian, School of Mahemaics and Compuer Sciences, Amirkabir Uniersiy of Technology (AUT), 424 Hafez Ae., Thehran, Iran 791

2 Aus. J. Basic & Appl. Sci., 7(2): , The qualiy of olume and number of ransacions and changes in prices has imporan consequences for fuures markes. Changes in price, olume and number of ransacions may affec he fuures conracs, in fac i coers he heory ha if promissory noes ac as a sabilizing facor of price or disrups he sabiliy of fuure prices. Deliery imes in Fuures conracs affec on he olume and number of ransacions and hrough his change, he price may change. Research Obecies: One of he mos imporan issues in capial markes is heir sudy wih he aim of idenifying he degree of efficiency of such markes. This knowledge undoubedly influences on inesors decisions and he securiy of sock exchanges and capial and also on managers and adminisraors undersanding o improe he operaion of markes and o direc i oward auhenic deelopmen. In he curren sudy, we sudy he performance of he Tehran Sock Exchange for cerain financial eens ha may affec he marke and achiee an accepable idenificaion of sensiiiy and effecieness degree using Principles and scienific mehods and based on marke es and is analysis and we also wan o deelop he mechanisms and performances which affec on sock. The oerall obecies of his research are: 1. Idenifying psychological facors in he Tehran Sock Exchange marke and inesors' behaior and how hey reac o he informaion. 2. Sudying he effec of price changes and rends in he number of ransacions. 3. Helping inesors in predicing fuure price rends. 4. Sudying he process of changing prices on he Tehran Sock Exchange. Due o he changes in sockholders' inesmen approach in recen years in Tehran Sock Exchange and due o he scienific process of ransacions, he resuls can guide sakeholders in conducing ransacions and also i can be a field for fuure research in capial markes. Research Hypoheses: The research hypoheses which hae been formulaed in line wih he research obecies are designed o find a logical answer o he research quesions include four main hypoheses as follows: 1. The relaionship beween he number of ransacions and price changes are posiie. 2. The relaionship beween he number of ransacions and he absolue price change is posiie 3. A dynamic relaionship exiss beween he number of ransacions and sock reurns 4. The number of ransacions explains ha he oupu is unsable. Research Mehodology: This is a correlaion and pos eens sudy. In his sudy, he relaionship beween he ariables is discussed. The sudy of he relaionship beween ariables is done by Pearson's correlaion coefficien. Boh library and field research will be used o collec informaion. Operaional Definiion of Variables: Definiion of each of he ariables in he sudy is as follows: Sock Reurns: he oal gains (losses) from inesmens in a gien period o he inesmen which has been spen in ha period Number of ransacions: in fac i means he number of ransacions during a rading day The number of annual ransacions was used in his research in order o inesigae he relaionship beween he number of concurren ransacions and sock reurns and he sudy is inspired by he sudies of Chen, Michael Firh and Olier Roy (21) and he following model is esed. Equaion 1 R R 1 1 u u V is he number of ransacions and R is efficiency. This model is based on a simple OLS regression and is a comprehensie model of Timohy Brailesford (1994) and Jean and Joe (1998). Referring he ariable R is imporan. In mos sudies ha hae been examined changes in prices and oupu are considered as equialen are shown in R which is inroduced under he naural logarihm of he price changes (reurns) and is calculaed using he following formula: 792

3 Aus. J. Basic & Appl. Sci., 7(2): , 213 P R In P 1 The same ariable is used in his sudy o ealuae he relaionship beween he growing number of ransacions and price changes. In ess, he number of ransacions on he efficiency fron, or ice ersa, is he opic discussed in he framework of Granger causaliy (1969) (Assuming ha he fuure can no affec on he pas). Granger causaliy relaionship based on icariae VAR model is used o inesigae he relaion ransacion numbers and sock reurn. This sudy used he following wo-ariable model o inesigae he relaion of rading and sock reurns. Equaion 2 R m i 1 m i 1 V i R i Here R is efficiency, V is he ransacion olume, m and n are he number of he opimal lags of he model which will be deermined by academic crieria (AIC) and Schwarz Bayesian (SBC). When is significan, efficiency alues of he pas and ransacion olumes gie a beer esimae of he fuure of ransacions. Thus, he efficiency facor is he number of ransacions. When is significan he pas alues of he number of ransacions and efficiency gie a beer esimae of fuure reurns by ha quaniy. I is said ha he efficiency facor is he number of ransacions and if boh are no zero (if significan), here will be a feedback of he relaionship beween he number of ransacions and he reurns. Sampling Mehodology: From he oal companies lised in Tehran Sock Exchange, which were classified in 36 indusry groups he oal number of ransacions in he company has calculaed during 5 years. And in each indusry group, companies were classified in a descending order based on oal number of ransacions for fie years. Finally, using he ariable probabiliy sampling (companies ha hae a higher number of ransacions, hae a beer chance of being seleced) from all indusry groups, a sample of 36 companies was seleced. Since he seleced companies ofen hae had he highes number of ransacions during he period of sudy, i is expeced ha hese are companies which hae been considered by inesors in he sock marke more han ohers. The research daa has been ealuaed in erms of normaliy using he Kolmogoro Smirno es. In wo hypohesis of his sudy ha examines he number of rades and price changes, his relaionship has been esed on a daily basis, and 4 days were randomly seleced as sample for each year of he sudy, a oal of 2 days in each of he seleced companies is inesigaed for 5 years. Normaliy Tes of Daa: According o he resuls of he Kolmogoro Smirno es i is noed ha he significance leel for daa was higher han /5. So i can be said ha he daa are normally disribued. i i n n R V Table 1: The resuls of Normaliy es of daa. Significance leel /12 /144 /19 /2 The ariable The number of daily ransacions Changes in Sock Price The number of annual ransacions Annual sock reurns Hypohesis Tesing: The resuls of esing hree research hypoheses are as follows in able 2: Table 2: The summary of he resuls of hypoheses esing. The es resul The significance leel Hypohesis H1 is fixed /33 Hypohesis H1 is fixed /48 Hypohesis H1 is fixed /31 The correlaion coefficien /356 /252 /36 The firs hypohesis The second hypohesis The hird hypohesis 793

4 Aus. J. Basic & Appl. Sci., 7(2): , 213 Wih regard o he firs hree hypoheses, here is a significan relaionship beween he number of ransacions and price changes and also he number of ransacions and sock reurns, and all hree hae had a posiie correlaion. I can be said ha by increasing he number of annual ransacions, he sock reurn will increase and by reducing he number of annual ransacions sock reurns will decrease. In fac, here will be a significan relaionship beween he annual number of ransacions and he olailiy of sock reurns changes. So we sudy he ariaion of annual sock reurns and he number of annual ransacions. Due o he large number of annual ransacions han he sock reurns he Square conersion mehod ( is used. Fig. 1: The comparison of sock reurns and he number of ransacions. Conclusion: Afer esing he research hypoheses, heir alidiy in he Tehran Sock Exchange was approed and a significan relaionship was found beween he number of ransacions and sock reurns. I can be seen from he Tehran Sock Marke by looking a he inesors decisions. In oher words, he basis for decision is he moemens of sock reurns and he number of rades. This may be due o he excessie aenion of shareholders o he number of rades changes and sock reurns in heir decisions. I can be said ha he maoriy of people who are engaged in he sock marke flucuaions and do no access o a lo of informaion and usually pay much aenion o he facor of he ransacion numbers, and so one reason for he posiie answer of his quesion due o he exchange behaior. I can also be concluded ha daa enry and sakeholders behaiors can be essenial in deermining he price and he sock price change. The changes in sakeholders behaiors are apparen in ransacion olumes "Or he number of shares ha can be raded in a day". And large changes in he number of ransacions represen a maor difference in he expecaions of shareholders. Suggesions Abou he Resuls: The resuls show ha differences in how informaion flows in emerging markes are imporan o he exen ha hey could affec he sock aluaion process and i indicaes he need for doing more research and undersanding he informaion flow. 1. Because shareholders reac agains he olailiy of he number of rades in he marke, The Tehran Sock Exchange mus hae more informaion relaed o he cause of hese flucuaions. 2. Changes in he number and price of shares in he Tehran Sock Exchange rades can resul from speculaie moemens of shor-erm buying and selling, and hese changes suddenly creae many queues for buying and selling. As a resul he Exchange Organizaion can esablish limis on shor-erm inesmens wih higher commissions Sale wih more sudies. 3. Wih regard o he increasing aenion of sock organizaion o he deelopmen of sock corporaions, he Increase of he number of shares and qualiaie monioring of few rading companies, i seems essenial o Increase he free floa of socks of companies and remoe he companies which make loss In order o clear ransacions in Tehran Sock Exchange. 4. Regarding he relaionship beween sock reurns and he number of ransacions, he managers are suggesed o show more sensiiiy o he number of ransacions. 5. The informaion is proided by each of he financial ariables, is differen from he res and none of hem proide complee informaion o he decision makers. I is recommended ha inesors pay more aenion o he number of ransacions as well as oher ariables. 794

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