Explaining stock anomalies using multifactorial asset pricing models

Subject Areas : Financial and Economic Modelling

Morteza Mahmoudi ¹ , jamal bahri sales ² , Saeed Jabbarzadeh Kangarlouie ³ , Ali Ashtab ⁴

1 - Accounting, Islamic Azad University, Urmia Brnach Departmet of Accounting, Islamic Azad University, Urmia Brnach, Urmia
2 - Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran
3 - Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran
4 - Department of Accounting, Urmia University, Urmia, Iran

Received: 2021-12-04 Accepted : 2022-10-11 Published : 2023-07-01

Keywords: Excess stock returns, multifactorial models, unexplained returns, stock anomalies,

Abstract :

This study investigates the effects of stock anomalies on excess stock and unexplained returns of multifactorial models in the companies listed at the Tehran Stock Exchange. We selected a sample of 120 companies listed at the Tehran Stock Exchange from 2008 to 2019 using the Fama-Macbeth [18] regression approach. The results revealed that stock anomalies led to considerable differences in excess stock returns of different portfolios, implying that stock returns at different anomaly levels significantly differ. In addition, it was found that the anomalies related to stock characteristics greatly impacted explaining excess stock returns in the three-factor and five-factor models suggested by Fama and French. Besides, in different portfolios of the anomalies, the unexplained return rates were significantly different from each other. Moreover, in Fama and French's three-factor and five-factor models, different anomaly portfolios show significant differences in explaining excess stock returns.

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