Comparison of profitability of speculation in the foreign exchange market and investment in Tehran Stock Exchange during Iran's currency crisis using conditional Sharpe ratio

Advances in Mathematical Finance and Applications

مقاله 2، دوره 5، شماره 3، مهر 2020، صفحه 271-284   

نوع مقاله: Research Paper

شناسه دیجیتال (DOI): 10.22034/amfa.2020.1881227.1317

نویسندگان

Mohsen Mehrara؛ Saeid Tajdini^*

Department of Theoretical Economics, Faculty of Economics, University of Tehran, Tehran, Iran

چکیده

In the first nine months of 2018, the triple increase of dollar price made the stock market an attractive place for speculation, especially for non-professional investors. Hence, this study was aimed to investigate the profitability of speculation in the foreign exchange market (dollar) and to compare it with investment in three indices of sugar, oil products, and basic metals. First, the conditional Sharpe ratio was calculated separately for these four assets. Then, six investment portfolios were developed for these four assets. The results showed although dollar speculation with mean daily return of 0.6% had the highest return among the ten investment assets, dollar speculation was ranked last, or tenth (0.096) in terms of performance and profitability by considering the standard deviation or daily conditional risk using conditional Sharpe ratio. Moreover, the results indicated that from among the six portfolios with equal weight, three investment portfolios consisting of merely Tehran Stock Exchange indices had a better performance than three investment portfolios comprising dollar speculation and each stock exchange index. It was also found that the risk of lack of capital diversification by investors was higher than that of accepting a higher-level risk.

کلیدواژه‌ها

conditional risk؛ conditional Sharpe ratio؛ dynamic condition correlation؛ exchange rate

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