Evaluating the efficiency of risk based stock return Forecasting in selected capital market industries

Subject Areas : Risk Management

Hamid Reza Akhbari ¹ , Heydar Mohammadzadeh Salteh ² , Rasoul Baradaran Hassanzadeh ³ , Mehdi Zeynali ⁴

1 - Department of Accounting, Ta.C., Islamic Azad University, Tabriz, Iran.
2 - Department of Accounting, Mara.C., Islamic Azad University, Marand, Iran.
3 - Department of Accounting, Ta.C., Islamic Azad University, Tabriz, Iran.
4 - Department of Accounting, Ta.C., Islamic Azad University, Tabriz, Iran.

Received: 2023-08-08 Accepted : 2025-01-11 Published : 2025-09-28

Keywords: Efficiency, Predicting Stock Returns, Risk, Selected Capital Market Industries,

Abstract :

Purpose: One of the key tasks in the field of investment is the optimal allocation of resources and the attainment of maximum returns. In this regard, stock return forecasting can be influenced by risk factors. This study aims to evaluate the efficiency of risk-based stock return forecasting in selected industries of the Iranian capital market.

Research Methodology: This study is applied in terms of its objective. Considering the nature of the data, it is classified as a post-event (ex-post facto) research. The reasoning method follows an inductive logic, and in terms of theoretical orientation, it is grounded in positive theory. The required data and information for the efficiency evaluation were mainly obtained from the financial statements of firms, databases of the Central Bank of Iran, and the resources of the Tehran Stock Exchange. After initial processing and classification in Excel, the data were statistically analyzed using R and GAMS software. It is noteworthy that the research sample includes 101 firms from 9 different industries over the period 2013 to 2021.

Findings: The results indicate that the Iranian capital market did not experience full efficiency in stock return forecasting during 2020 and 2021. Moreover, a downward trend in stock return efficiency was observed throughout the research period, which is attributable to the lack of acceptance and improper management of the capital market from a macroeconomic perspective. In other words, in Iran’s current economic conditions, systematic and unsystematic risk factors fail to adequately support reliable forecasts of future stock returns, due to heightened macroeconomic uncertainty. Therefore, achieving full efficiency is subject to various constraints.

Originality / Value: For rational decision-making, capital market participants need to properly account for both systematic and unsystematic risk in line with the efficiency of the Iranian stock market, while considering prevailing macroeconomic conditions.

 

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