Investigation of Volatility of Stock Returns in the Tehran Stock Exchange Using Chaotic Systems

Study of the changes in the stock price in Tehran stock exchange is of great importance. This is because of its application in forecasting the stock price in the stock exchange. The aim of this article is to investigate the forces and mechanisms that cause the dramatic changes in stock price and the formation of chaotic trend. To test whether the chaotic trend in the Tehran stock exchange exists, the daily stock price of Bakhtar Cable Company (as a sample) for the period of 05/25/2008-08/20/2008 has been tested using the Brock, Dechert and Scheinkman (BDS) test. The results showed that there exists chaotic behavior in the stock price time series, and the stock price moves in trend. The findings of the research confirmed that chaotic method can be applied to detect and forecast the stock price trend in Tehran stock exchange.