Dependence Structure between the TEHRAN Stock Exchange and the Derivatives Market of the IRAN Mercantile Exchange: Copula-GARCH Approach.

This paper attempts to analyze the dependence structure between returns on the Tehran Stock Exchange (TEPIX) index and (Bahar-Azadi) Gold Coin Futures (GCF) during the period from December 13, 2008 to December 21, 2015. To address this issue, we employ different copula models that allow for capturing extreme dependence (tail dependence) and asymmetry. The empirical results show that the dependence structure between the return series is low and positive. Furthermore, we find evidence of time-varying upper tail dependence, which highlights that the return series co-move in a bullish market. Our results suggest that investors and risk managers may obtain diversification benefits from GCF, especially during market upturns. [ABSTRACT FROM AUTHOR]