Implied Equity Duration and Excess Stock Return: The Evidence from Tehran Stock Exchange

Subject Areas : Financial engineering

Afsaneh Soroushyar ¹ , Hossein Kazemi Gavarti ²

1 - Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran
2 - Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran

Received: 2017-11-27 Accepted : 2018-01-12 Published : 2018-06-22

Keywords: Implied Equity Duration, Stock Value Premium, Excess Stock Return, Fama - French Model,

Abstract :

The purpose of this paper is to investigate the effect of value premium factor and implied equity duration factor on excess stock returns in Companies Listed in Tehran Stock Exchange. For testing the research hypotheses, the Fama - French Model (1993) is used. The evidence of previous research shows the relationship between the timing of firms' cash flows and value premium. Therefore, in this research, the effect of value premium factor on excess stock returns (similar to the Fama- French Model) are examined and then value premium factor replaced with implied equity duration. The statistical society is companies listed on Tehran Stock Exchange and the research sample includes 145 companies using the systematic elimination method, in the period of 2007-2016. The results indicate both value premium factor and implied equity duration factor have the significant and positive effect on the excess stock returns.