Explaining the Effective Factors of Stock Returns Using the Investment Options Approach
Subject Areas : Journal of Investment Knowledge
Farzin
Khoshkar Hassankiadeh
1
(Ph.D. Student of Accounting, Department of Accounting, Babol Branch, Islamic University, Babol , Iran.)
Seyed Ali
Nabavi Chashmi
2
(Department of Accounting, Babol Branch, Islamic University, Babol , Iran.)
Iman
Dadashi
3
(Department of Accounting, Babol Branch, Islamic University, Babol , Iran.)
Kaveh
Azinfar
4
(Department of Accounting, Babol Branch, Islamic University, Babol , Iran.)
Keywords: Stock Returns, Fama and French's Five-Factor Model, Investment Options, real option, Grullon's Four-Factor Model,
Abstract :
The necessity of research on predicting investment returns and presenting effective models of its explaining and compare the most efficient ones, affects both the expansion of investment in the financial market and the creation of more confident conditions for decision making and portfolio formation. Experimental testing of some models has shown that investment options are measurable as a way to create more options as one of the most common types of real options based on investment options and can be effective in explaining stock returns. The purpose of study is to explain the factors affecting equity returns using the investment options approach. The information from this study is taken from the financial statements of 146 companies during the period 1390-1397. The research is applied in terms of purpose; in terms of nature and content it is a correlation type. Multiple regression based on panel data analysis was used to test the relationship between variables and the significance of the model. The results of the hypotheses test showed that investment options based on Grullon's four-factor model affect stock returns and firms with more aggregated investment options based on Grullon's model have higher stock returns. In addition, the results showed that there is a significant difference between the explanatory power of Fama and French's five-factor asset pricing model and the investment options model based on Grullon's model in explaining stock returns. And the explanatory power of the Grullon's model in explaining stock returns is more than the Fama and French five-factor model.
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