Predicting stock returns at the company level: An application of linking asset pricing models and economic factors

maryam bahmani ¹ (Department of Industrial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran)
MoahammadEbrahim Pourzarandi ² (Department of Industrial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran)
Mehrzad Minoei ³ (Department of Industrial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran)

Submited date : 2022-07-11 accepted date : 2022-11-27

Keywords: Stock Returns, Economic factors, asset pricing models,

Abstract :

This research has been done in order to predict stock returns at the company level: an application of linking asset pricing models and economic factors, in 130 selected companies admitted to the Tehran Stock Exchange between 2011 and 2018. In this research, an attempt has been made to propose a model for predicting future performance by combining a multi-factor model and a research model. The results showed that 1) anomalies in stock returns were evaluated and according to the results obtained based on the Gibbons test, it is the only model based on the proposed research model that is able to explain anomalies in stock returns unlike the multi-factor models (single, three, four and five agent) 2) Due to the complexity and conflict in the relationship between explanatory variables and future performance, the power to explain the proposed research model in predicting anomalies in accruals and research and development costs to the value of the company, is weaker than multifactorial models that use of The integrated model of research (using profitability, returns based on the lowest and highest price) as well as the proposed model have shown a better explanatory power in this field.