Investigating the effect of underreaction and overreaction on Iran's capital market risk

Subject Areas : Journal of Investment Knowledge

mojtaba sangari ¹ , Mohammad Ali Aghaei ² , Fariborz Avazzadeh Fath ³ , Ali Pirzad ⁴

1 - Ph.D Student of Accounting , Department of Accounting ,Yasuj Branch , Islamic Azad University , Yasuj, iran.
2 - Associate Professor , Deparment of Accounting ,Tarbiat Modares University , Tehran , Iran.
3 - Assistant Professor, Deparment of Accounting , Gachsaran branch , Islamic Azad University , Gachsaran , Iran
4 - Assistant Professor , Department of Management , Yasuj branch , Islamic Azad University , Yasuj , iran.

Received: 2022-11-09 Accepted : 2023-04-09 Published : 2024-12-21

Keywords: Overreaction, capital market, Risk taking, Underreaction,

Abstract :

The purpose of the current research is to examine the effect of underreaction and overreaction on the risk distribution of the Iranian capital market. The current research is a post-event descriptive and applied type in terms of purpose. The target statistical population is all active and accepted companies in Tehran Stock Exchange, whose shares were traded in Tehran Stock Exchange from 2010 to 2019, and the statistical sample was selected based on the method of systematic elimination of 182 companies. In order to collect the required data and financial information, primary and secondary data such as reports of financial statements and audited financial statements of stock companies for a period of 10 years have been used and analyzed by Eviews9 software. For the inferential analysis of the variables, various statistical tests were used, including the Limer and Hausman F test, regression test, and panel data. The results of the research showed that there is a positive and significant relationship between underreaction and overreaction with Iran's capital market risk. In other words, incorrect pricing leads to underreaction or overreaction in stock prices from the psychological deviation of the investor, such as the investor's misunderstanding of the company's profit.

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