Abstract

The study was conducted to develop Bayesian model of stock behavior of the pharmaceutical companies in Tehran Stock Exchange. Accordingly, the return volatility of the pharmaceutical group index in Tehran Stock Exchange and its trading volume were examined on daily, weekly, and monthly bases from April 21, 2015 to February 27, 2019. The results show that the correlation between variables is negative dynamic conditional correlation. Moreover, it is observed that investors are reluctant to sell their stocks as they expect prices to increase more with the increase in returns and thus reduce the trading volumes in the market by not selling them and vice versa. On the other hand, the results show that considering the skewed student-t distribution for the residuals with a wider tail than the normal distribution and applying skewness bring about better performance compared to other distributions‎.