The Survey of relationship between risk and stock return in Tehran Securities Exchange : Study of momentum effect and liquidity Premium

اقتصاد پولی مالی

Article 4, Volume 21, Issue 7, January 2015, Pages 48-104   

Document Type: پژوهشی

DOI: 10.22067/pm.v21i7.43015

Authors

Hassan Ghalibafasl^* ; Mohsen Izad

Abstract

In this study the aim is to test whether financial market anomalies such as market
risk premium, firm size, the book-to-market ratio, the turnover rate, and momentum
both with and without the inclusion of the market liquidity risk factor in the case of
the Tehran stock exchange can explain stock returns? To this end, a number of 67
listed companies of Tehran Stock Exchange, based on Criteria filtering method,
have been chosen as a sample. Data are collected on a monthly basis for the period
2008-2011 and by using EViews and panel data. finding indicate that during the
study period, factors such as market risk premium, the book-to-market ratio and
liquidity risk have meaningful correlation with excess return in Tehran Stock
Exchange.

Keywords

Excess Return; Market Risk Premium; Size; The Book-To-Market Ratio; Liquidity; Panel Data

References

[1] Eslami Bidgoli, Gh. Ghalibaf asl, H. & Alishvndi, A. (2009). The effects of

price limit on the trading market, market return, trade frequency, trade size

and velocity in Tehran Stock Exchange. Journal of Financial Research,

11(27): 3-22 (in Persian).

[2] Afshari, A. (2000). Financial Management in Theory and Practice. Tehran:

Soroush Publication (in Persian).

[3] Bagherzadeh, S. (2003). Factors affecting the expected return of the stock of

listed companies on Tehran Stock Exchange: Some empirical evidence.

Journal of Financial Research, 5(16): 23-47 (in Persian).

[4] Bakhshandeh, S. (1991). Examine the Relationship Between Risk and Return

in the Tehran Stock Exchange. Unpublished Master Dissertation. Tehran

University, Faculty of Management (in Persian).

[5] Raei, R. & Pouyanfar, A. (2012). Advanced Investment Management. First

Edition. Tehran: SAMT Publication (in Persian).

[6] The Tehran Stock Exchange, Inc. (2009). Factors Affecting Liquidity in

Emerging Markets, Available in Library of the Tehran Stock Exchange (in

Persian).

[7] Shirinbakhsh, Sh. & Khonsari, Z. (2005) Application of E-Views in

Econometrics. Tehran: Institute of Economic Affairs (in Persian).

[8] Ghalibaf asl, H. (2003). Financial Management. Tehran: Pouran Pajohesh (in

Persian).

[9] Ghalibaf asl, H. & Kalbari, S. (2009). Volume & size-related lead-lag effects

in stock return & volatility: An empirical investigation of the Tehran Stock

Exchange, Journal of Financial Research, 11(27): 81- 96 (in Persian).

[10] Ghaemi, M.H. (2000). Examination of Effective Factors on the Expected

Return For Listed Corporate on Tehran Stock Exchange. Unpublished PhD

Dissertation. Tehran University, Faculty of Management (in Persian).

[11] Kimiagari, A.M., Eslami Bidgoli, Gh. & Eskandari, M. (2007). Test of the

Fama-French three-factor model in Tehran Stock Exchange. Journal of

Financial Research, 9(23): 61-82 (in Persian).

[12] Karimi, M. (2011). Examination of Pricing, Liquidity, Size, Value and Market

Risk in the Tehran Stock Exchange. Unpublished Master Thesis. Tehran:

College of Economic Sciences (in Persian).[13] Gujarati, D. & Abrishami, H. (2005). Principles of Econometrics (Volume II).

Tehran: Tehran University Publications (in Persian).

[14] Modarres, A. & Abdullah Zadeh, F. (2011). Financial Management. First

Edition, Tehran: The Commercial Printing & Publishing Company (in

Persian).

[15] Yahyazadeh Far, M. & Khorramdin, J. (2008). The role of liquidity factors

and illiquidity risk on excess stock return in Tehran Stock Exchange.

Accounting and Auditing Reviews, 15(53): 101-118 (in Persian).

[16] Yahyazadeh Far, M., Shams, Sh. & Larimi, J. (2010). The relationship

between liquidity and stocks return in Tehran Stock Exchange. Journal of

Financial Research, 12(29): 111-128 (in Persian).

[17] Acharya, V. & Pedersen, L. (2005), Asset pricing with liquidity risk. Journal

of Financial Economics, 77, pp.375-410.

[18] Amihud, Y.,(2002), Illiquidity and stock returns: cross-section and time-series

effects, Journal of Financial Markets, 5, pp. 31-56.

[19] Avramov, D., Chordia, T. (2006). Asset pricing models and financial market

anomalies. Review of Financial Studies 19,pp. 1001–1040.

[20] Bagherzadeh, Saeed. (2003). "The Cross-Section of Expected StockReturns in

Iranian Stock Market: Some Empirical Evidence. "The Financial Research

Iranian Journal of15, pp. 141-160.

[21] Baker M. Stein J (2003). Market Liquidity as a Sentiment Indicator, Journal

of Financial Markets 7 (3), pp. 271-299.

[22] Fama, F .Eugene & French, Kenneth .R (1995) Size & Book-to-Market

Factors in Earnings and Returns.

[23] Fama, F .Eugene & French, Kenneth .R (1992) The cross-section of expected

stock returns. Journal of Finance- June 1992.

[24] Francis A. Longstaff (2005). Asset Pricing In Markets With Illiquid

AssetsUniversity of California, Los Angeles - Finance Area; National Bureau

of Economic Research (NBER).

[25] H. markowits (1952) Portfolio selection. Journal of Finance vol.7.77-91

[26] Jing Chen (2005). Pervasive Liquidity Risk and Asset Pricing, Job Market

Paper.

[27] Liu, Weimin (2006). A liquidity-augmented capital asset pricing model,

Journal of financial Economics, pp. 631–671.

[28] Leroy, Stephen F.Werner, Jan.(2000). Principles of Financial

Economics.p:21-25

[29] Marshall Ben R, Martin Young (2003). Liquidity and stock returns in pure

order-driven markets: evidence from the Australian stock market,

International Review of Financial Analysis, 12 Extrapolative Expectations:

Implications for Volatility and Liquidity:pp. 173–188.

[30] Omri A, Zayani M, Loukil N (2004). Impact of Liquidity On Stock ReturnAn Empirical Investigation of The Tunis Stock Market, Finance and Business

Strategies, Social Science Electronic Publishing.

[31] Pastor, L., Stambaugh, R., (2003). Liquidity risk and expected stock returns.

Journal of Political Economy 111,pp 642–685.