Pricing Model

Open Access Article

1 - The role of political-cultural factors as undesirable risk reducing factors in the petrochemical industry
jehad barzigar

introduction: This study was conducted to determine the political-economic factors that play a risk-reducing role in petrochemical companies listed on the Tehran Stock Exchange with a financial and marketing approach.Methodology: In quantitative assessment of political- More

introduction: This study was conducted to determine the political-economic factors that play a risk-reducing role in petrochemical companies listed on the Tehran Stock Exchange with a financial and marketing approach.Methodology: In quantitative assessment of political-cultural factors, arbitrage pricing model and adverse risk in the petrochemical industry and a questionnaire and analysis of answers with beta coefficient of MATLAB and Excel software were used. In qualitative assessment (ranking) of political-cultural factors with marketing-financial approach and 3 samples of questionnaires were used and these questionnaires were analyzed through Friedman ranking test in SPSS software.Findings: Quantitative findings indicate that the return on stocks of the portfolio of petrochemical companies listed on the Tehran Stock Exchange shows an unfavorable stock risk, which qualitative findings indicate that political factors such as government support for foreign investment and Joint ventures are the most important factor in reducing this unfavorable risk in the petrochemical industry. Also, increasing the export of petrochemical products has been identified as another important factor in reducing risk in the petrochemical industry.Conclusion: The highest risk that threatens the return of shares in the portfolio of petrochemical companies is due to political and cultural factors, laws and regulations, technology, etc. Manuscript profile

Open Access Article

2 - Extraction of a Mathematical Capital Asset Pricing Model within the Framework of Mental Accounting
Mohammadreza Ola Hashem Nikoomaram Azita Jahanshad Zahra Pourzamani

Ordinary investors do not look to their portfolio as a whole. These investors consider their portfolio as a set of mental arithmetic. In mental accounting, the conventional issue of maximizing the expected return is faced with the constraint of maximum likelihood to fai More

Ordinary investors do not look to their portfolio as a whole. These investors consider their portfolio as a set of mental arithmetic. In mental accounting, the conventional issue of maximizing the expected return is faced with the constraint of maximum likelihood to fail in achieving the return threshold. The present study extracts the capital asset pricing model from Markowitz Mean-Variance Portfolio Model and risk-free asset entering the limitations of this model. Then, MA-CAPM model is extracted by creating a mathematical equivalence between the components of this model and the limitation of mental accounting. In this model, expected investment return for any purpose presented in the form of mental arithmetic is a function of the return on risk-free asset, beta and risk premium of mental arithmetic where the risk premium of mental arithmetic equals the difference between returns of each account and risk-free return on assets. Expected rate of return on assets in the MA-CAPM will be influenced by return threshold and likelihood to fail in reaching this threshold, i.e. mental arithmetic risk. Manuscript profile

Open Access Article

3 - Asset Pricing Model On The Basis Of Liquidity Risk Factor
M. Ali Khojasteh Reza Tehrani

Liquidity is a multidimensional concept. In this essay we studied the behavior of liquidity in the asset pricing model of Tehran Stock Exchange on the basis of multi measures related to multi dimensions of liquidity concept. The traded value measurement is used as a pro More

Liquidity is a multidimensional concept. In this essay we studied the behavior of liquidity in the asset pricing model of Tehran Stock Exchange on the basis of multi measures related to multi dimensions of liquidity concept. The traded value measurement is used as a proxy for the value dimension, turnover ratio is used as a proxy for speed dimension and Amihud measure is used as a proxy for cost and price impact dimension. The time period is from 2011 up to 2016 and the data is calculated for 60 months. The result is that four factor model on the basis of each liquidity measure improves the style portfolios (size style, value style and liquidity style) as well as stock level. The improvement level is higher for the illiquid style portfolios. Among 201 studied stocks, the augmented model improves asset pricing model explanation of 50 stocks. Level of liquidity beta depends on the measurement used. Manuscript profile

Open Access Article

4 - Study the Relation between Exchange Rate as one of the Microeconomic Variable and Stock Return with APT Model (Examined Export Company in Tehran Stock Exchange)
Zahra Farshadfar

This research trying to study the effect of exchange rate on risk and return of Export Company with Arbitrage Pricing Model and panel data in 2008- 2012 duration. Because increasing international trade case to risk and return in Export Company goes up. Result show that More

This research trying to study the effect of exchange rate on risk and return of Export Company with Arbitrage Pricing Model and panel data in 2008- 2012 duration. Because increasing international trade case to risk and return in Export Company goes up. Result show that there is positive relation between stock return, exchange rate and its differences Manuscript profile

Open Access Article

5 - Review and Assessment of Capital Assets Pricing Models and Compare Them with the 5-Factor Model of Fama and French “Using Economic Variables Exchange; Rates, Inflation, Import and Liquidity”
Mohammad Hossein Ranjbar Hossein Badiee Maysam Mohebi

The present research tries to assess and compare the Capital Asset Pricing Models in stock exchange of Tehran. Financial data of 108 companies in stock market (2009-2014) are processed. The important issue is to use suitable patterns and models for evaluating and price More

The present research tries to assess and compare the Capital Asset Pricing Models in stock exchange of Tehran. Financial data of 108 companies in stock market (2009-2014) are processed. The important issue is to use suitable patterns and models for evaluating and price setting in stock market. These models must have the ability to predict the behavior of the prices and also can estimate the outcome and efficiency of the so-called investment. The models investigated in this research, include the traditional investment financial pricing, 3-factor model and FAMA and French 5-factor and consumption investment models. In order to analyze the data and to test the hypothesis, we used OLS model for time series models. In this study, models are investigated according to the models of significance lateral distance from the source (Jensen's Alpha). A model, of which efficiency is high, should have a zero intercept. Generally, FAMA and French 5-factor models that were developed in 2014, work more efficiently. Then comes the Capital Asset Pricing Model Manuscript profile

Open Access Article

6 - A meta-analysis on the capital asset pricing model
Saeed Fathi Farideh Tavakoli Iman Ostad

Capital asset pricing model is an equilibrium model to show the relationship between systematic risk and return of capital assets and indicate the pricing of assets due to their systematic risk. Abundance of empirical studies in testing standard and developed CAPM shows More

Capital asset pricing model is an equilibrium model to show the relationship between systematic risk and return of capital assets and indicate the pricing of assets due to their systematic risk. Abundance of empirical studies in testing standard and developed CAPM shows the importance of CAPM in estimating the price of financial assets. The meta-analytic approach of this paper creates a distinct realization to this context of finance by using of variance analysis, correlation test and means difference. So we use the statistical results of 418 CAPM tests during 1972 to 2016. The results show that time period of the test, type of portfolio ranking, country development grade, type of systematic risk and the type of CAPM test have a significant effect on the price of beta. Manuscript profile

Open Access Article

7 - Testing the application of inflows (outflows) of mutual funds in the assessment and prioritization of asset pricing models
Masoome Khermandar Hamid Reza Vakilifard Ghodrat Allah Talebnia Ramezan Ali Royaee

In this research, a new method based on quantitative variables, instead of price and return variables, has been presented to evaluate and prioritize capital asset pricing models. The present study, using capital inflows (outflows) of mutual funds (quantitative variable) More

In this research, a new method based on quantitative variables, instead of price and return variables, has been presented to evaluate and prioritize capital asset pricing models. The present study, using capital inflows (outflows) of mutual funds (quantitative variable), has determined the model of capital asset pricing models (CAPM, F-F, F-F-C, CCAPM) that is mostly used by investors to decide on a allocation of capital. This study uses the data of mutual funds in the capital market of Iran during the period 1392 to 1396, and with the implementation of ordinary least squares regression (OLS) this method has been presented. Manuscript profile

Open Access Article

8 - Macroeconomics variables and corporate events effect on systematic risk according to jump beta
Ali Askarinejad Amiri Mohammad E. FadaeiNejad GholamHossein Assadi

We suppose jump beta and continuous beta as two indexes of systematic risk, then studying macroeconomics variables and corporate events effects on them. The results shows that macroeconomics variables effect on continuous beta is greater than its effect on jump beta. Wh More

We suppose jump beta and continuous beta as two indexes of systematic risk, then studying macroeconomics variables and corporate events effects on them. The results shows that macroeconomics variables effect on continuous beta is greater than its effect on jump beta. While inflation rate has no sensible effect on both betas, growth rate increase causes increase in both and exchange rate increase causes decrease in both betas. The decrease is for times greater in jump beta. According to event study, two or three weeks before capital increase, considerable decrease in jump beta and a week before capital increase, sensible increase in continuous beta are seen. As observed about profit announcement event, news of positive adjustments reach sooner to market than negative adjustments. Positive adjustment cause a little increase in continuous beta, three or four weeks before event and negative adjustment cause considerable decrease in continuous beta around event, while profit announcement has no effect on jump beta.       Manuscript profile

Open Access Article

9 - Performance Evaluation of risk premium measurement models: q-theory asset pricing model against three factor model of fama and french
Gholamreza kordestani Mozhde Ghasemi

Financial scholars have made valuable efforts to measure risk premium. Recently, Chen et al (2010) proposed a three factor model based on market factor, investment factor, and profitability factor for explaining stock return and called it q-theory model. Prior researche More

Financial scholars have made valuable efforts to measure risk premium. Recently, Chen et al (2010) proposed a three factor model based on market factor, investment factor, and profitability factor for explaining stock return and called it q-theory model. Prior researches have shown that this model reduces the magnitude of the abnormal returns of a wide range of anomalies. This research examines the performance of new model in explaining the risk premium of the individual stock and portfolio of stock, and compares it with the performance of CAPM and three factor model of Fama and French in stock exchange market. Sample under investigation consist of 72 listed companies for the period of 1386-1391. The results show that risk premium of stocks has a significant relationship with the sensitivity of its returns to investment and profitability factors. Furthermore, q-theory model significantly excel CAPM in explaining risk premium of firm size, book to market value and momentum portfolios. But it significantly excels three factor model of Fama and French just in explaining the risk premium of momentum portfolios. Manuscript profile

Open Access Article

10 - Risk-Return Tradeoff: Evidence of Capital Assets Pricing Model
Roohollah Farhadi Ali Saghafi Mohammad Taghi Taghavifard

In this research, return and risk tradeoff examined using standard form of Capital Assets Pricing Model (CAPM) in Tehran Securities Exchange (TSE). Using a methodology related to the field of Ex post facto studies in financial researches, OLS and Quantile regression mod More

In this research, return and risk tradeoff examined using standard form of Capital Assets Pricing Model (CAPM) in Tehran Securities Exchange (TSE). Using a methodology related to the field of Ex post facto studies in financial researches, OLS and Quantile regression model was used for test of CAPM. Results of running (linear and Quantile) two stage regression show that beta as systematic risk proxy cannot explain excess returns difference. Results show also unique risk can explain excess returns, although relation of unique risk and excess return is variant in different quartile of returns. As a conclusion, it can be stated that at least using of TSE Index as proxy of market portfolio, CAPM model does not explain stock prices. Manuscript profile

Open Access Article

11 - Higher moments portfolio Optimization with unequal weights based on Generalized Capital Asset pricing model with independent and identically asymmetric Power Distribution
Bahman Esmaeili Ali Souri Sayyed Mojtaba Mirlohi

10.22034/amfa.2020.1909590.1484

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Open Access Article

12 - Developing the Stock Pricing Model based on Bounded Rationality Theory
Mohammad Noroozi Daruosh Foroghi farzad Karimi

10.22034/amfa.2022.1940035.1632

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Open Access Article

13 - Provide an improved factor pricing model using neural networks and the gray wolf optimization algorithm
Reza Tehrani Ali Souri Ardeshir Zohrabi Seyyed Jalal Sadeghi Sharif

10.22034/amfa.2022.1942547.1641

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Open Access Article

14 - Studying the Expected Returns Based on Carhart Model Com-pared to CAPM Model and Implicit Capital Cost Model Based on Cash and Capital Flow of Growth and Value stocks
Akram Khani Farahani Majid Sheshmani Ali Mohades

10.22034/amfa.2017.536267

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Open Access Article

15 - Real Business Cycles Model with Habits Formation: A Resolution of the Equity Premium Puzzle
Seyed Fakhreddin Fakhrhoseini

In economic literature, habits formation has been succeed in reproducing some of the historical financial information and it can simplify the difficulties pertaining to simulating financial markets variables and business cycles. The aim in this paper is investigating pe More

In economic literature, habits formation has been succeed in reproducing some of the historical financial information and it can simplify the difficulties pertaining to simulating financial markets variables and business cycles. The aim in this paper is investigating performance of habits formation while inseparability between consumption and leisure.  The data are related to the constant prices in 1383 and annually from 1966 to 2014. So, the variables were been detrended   after taking logarithm of the variables by using Hodrick- Prescott filter. The final model equations have been specified around the linearized stabled situation through the Ohlig (1999) approach for linearized stochastic equations, in the form of a space-state model in Matlab programming. The results show that adding habits formation parameter can increase the Sharpe ratio or no risky asset fluctuations and inseparability between consumption and leisure can help explain the equity premium puzzle.  Manuscript profile

Open Access Article

16 - Comparison and analysis of stock futures return response to non-systematic risk torque measurement models(comparative prediction with neural network
roqaye talebi

Abstract The mean and variance of stock returns alone are not sufficient to describe the distribution of returns. , paying attention to higher torques such as skewness and kurtosisas a risk index instead of variance leads to more accurate results. Therefore, due to stu More

Abstract The mean and variance of stock returns alone are not sufficient to describe the distribution of returns. , paying attention to higher torques such as skewness and kurtosisas a risk index instead of variance leads to more accurate results. Therefore, due to study contradictions, the study of stock returns reaction to models for measuring non-systematic risk moments was significant. For this purpose, 152 companies were selected( In the realm of time between 2014to 2021 ) as a statistical sample from the companies listed on the Tehran Stock Exchange based on the systematic removal method (CAPM & FF3). Also, by determining the superior regression model, the power of the superior regression model was compared with the neural network model. results showed that by increasing the unsystematic risk torques calculated with the capital asset pricing model and the Fama and French tree-factor model reduce future stock returns; These results can be justified in line with the concepts of capital market efficiency theory.Other results indicate that the difference in expected non-systematic risk calculated with CAPM and FF3 models is significant. Therefore, the strength of the expected non-systematic risk torques calculated by the capital asset pricing model is less than the Fama and French three-factor model. By comparing the neural network model coefficient and linear regression, it can be said that the neural network-based model has a better performance in predicting future stock returns based on non-systematic risk moments than linear regression. Manuscript profile

Open Access Article

17 - بررسی تصمیم‌گیری تامین مالی و ساختار سرمایه در سرمایه گذاری واقعی
رضا آقاجان نشتایی ابراهیم چیرانی مهرداد گودرزوندچگینی

در سرمایه‌گذاری واقعی، رابطه بین تامین‌مالی برون سازمانی با بازده غیر عادی سهام وجود دارد. این بررسی رابطه منفی بین تامین‌مالی برون سازمانی و بازده سهام را پیش‌بینی می‌نمایند.متغیر وابسته تحقیق بازده سهام و متغیرهای مستقل شامل خالص تامین مالی و نسبت سرمایه همچنین متغیره More

در سرمایه‌گذاری واقعی، رابطه بین تامین‌مالی برون سازمانی با بازده غیر عادی سهام وجود دارد. این بررسی رابطه منفی بین تامین‌مالی برون سازمانی و بازده سهام را پیش‌بینی می‌نمایند.متغیر وابسته تحقیق بازده سهام و متغیرهای مستقل شامل خالص تامین مالی و نسبت سرمایه همچنین متغیرهای کنترلی تحقیق رشد دارایی‌ها، اندازه شرکت و سن شرکت می‌باشد. در این تحقیقی با استفاده از اطلاعات مالی 178 شرکت صنعتی پذیرفته شده در بورس اوراق بهادار تهران طی دوره زمانی 1395-1391 و با استفاده از مدل و تجزیه و تحلیل رگرسیون ترکیبی، فرضیه‌ها آزمون شده است. نتایج بیانگر رابطه مثبت تامین مالی برون سازمانی، در دو حالت ترکیبی و خالص، با بازده غیرعادی سهام و رابطه منفی تامین‌مالی برون سازمانی در دو حالت مذکور با بازده غیرعادی سهام در مدل سهام است. همچنین رابطه میان خالص تامین‌مالی و ترکیب تامین‌مالی به صورت همزمان، با بازده غیرعادی سهام معنادار نمی‌باشد. Manuscript profile

Open Access Article

18 - A comparison between,CAPM,Fama and French,s models and artificial neural networks in predicting the Iranian stock Market
S.M Jafari جواد Misaghi میثم Ahmadvand

Comparison between the Capital Asset Pricing model,Fama and Ferench three factors model and Artificial Neural Network model in predicting Tehran stock Exchange returns is discussed in this research.the first two models are linear and the following are nonlinear.Four hyp More

Comparison between the Capital Asset Pricing model,Fama and Ferench three factors model and Artificial Neural Network model in predicting Tehran stock Exchange returns is discussed in this research.the first two models are linear and the following are nonlinear.Four hypotheses have been designed for this purpose.To examine these hypotheses,the expected return was calculated daily during 1383 to 1387 for 110 companies.companies in each quarter have divided to 6 portfolios by size and book to market value factors. Results showed that the performance of Fama &Ferench three factors model is better than Capital Asset pricing model.Also Univariable and Multyvariable Artificial Neural Network models have better performance in compare with their corresponding nonlinear models. Manuscript profile

Open Access Article

19 - Higher moments Portfolio Optimization based on Generalized CAPM with asymmetric power distribution and fat tail
Ali Souri Saeid Fallahpour Bahman Esmaeili

Every investor wants to select the optimal combination of return and risk in order to maximize their utility. In this study, an attempt was made to explain the optimal model for estimating returns and risk in cases where there is a financial crisis and the distribution More

Every investor wants to select the optimal combination of return and risk in order to maximize their utility. In this study, an attempt was made to explain the optimal model for estimating returns and risk in cases where there is a financial crisis and the distribution of return on assets does not follow the normal distribution.For this purpose, we use CAPM with independent and identically asymmetric power distribution (CAPM-IIAPD) and CAPM with independent identically saymmetric exponential power distribution with two tail parameters (CAPM-IAEPD) instead of traditional CAPM. When the assumption of normality is violated, higher moments are used to optimize the model. In the next step, using Polynomial Goal Programming, we calculate optimal portfolios with third and fourth moments.The time horizon of the research from 2011 to 2018 and the statistical population has been all the companies of Tehran Stock Exchange, among which 30 companies have been selected.The results show that CAPM-IIAPD Model is the best model among three models and the adjusted return on risk in optimized models with thirs and fourth moemnts in generalized CAPM models is significantly different from the traditional model and has a better performance. Manuscript profile

Open Access Article

20 - Predicting stock returns at the company level: An application of linking asset pricing models and economic factors
maryam bahmani MoahammadEbrahim Pourzarandi Mehrzad Minoei

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 h More

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. Manuscript profile

Open Access Article

21 - The Development and Assessment of Stock Pricing Model Based on the Anchoring and Adjustment Theory
Mohammad Noroozi daruosh foroughi farzad karimi

The Financial market analysis is an important issue that influences investors' decisions. This paper developed the stock pricing model by comparing the predicted stock price based on the anchoring and adjustment theory and the real stock price through collecting and ana More

The Financial market analysis is an important issue that influences investors' decisions. This paper developed the stock pricing model by comparing the predicted stock price based on the anchoring and adjustment theory and the real stock price through collecting and analyzing the initial information and data of 122 companies listed on the Tehran Stock Exchange during the period 2011 to 2019. The results of this study show the effectiveness of the anchoring and adjustment theory based on the separation of stock return components and measuring the irrationality coefficient and emotional reactions of investors' decisions in stock prices. Accordingly, the limitations of investors 'ability to process information seem to affect the level of use of reasoning and rationality in decision-making and the effect of bounded rationality through the irrationality and limited attention on stock pricing. Therefore, it is expected that knowledge about the process of bounded rationality based on the rational bounded of investors and the behavioral biases resulting from the irrational part of their thinking, will provide a good explanation for the process of changes in financial markets. This can provide both profit opportunities and costs in investment management so that it can be used in modeling, analysis and investmentstrategies. Manuscript profile

Open Access Article

22 - An Investigation on liquidity Risk in Tehran Security Exchange Market with non-trading days: Insights from liquidity-adjusted CAPM
Pedram Samiee Tabrizi Ali Najafi moghadam

Stock liquidity risk can be considered as one of the most important factors in determining the expected returns of investors.Determining a suitable measure based on the characteristics of the company in the capital market that can help define the liquidity of the stock, More

Stock liquidity risk can be considered as one of the most important factors in determining the expected returns of investors.Determining a suitable measure based on the characteristics of the company in the capital market that can help define the liquidity of the stock, would lead to a proper decision of investors. In this regard, in the present study, the effect of the systemic liquidity risk of assets (in particular stocks) in the Tehran Stock Exchange was investigated during the years 1385-1395.  In this research, the d non-trading days are used as liquidity indicators of stock trades.  It was found that, first, The co-movement between individual stock liquidity and market liquidity is not significantly related to stock returns. Second . The co-movement between market returns and individual stock liquidity is positively related to stock returns. Third, The co-movement between market liquidity and individual stock returns is negetivly related to stock returns. Manuscript profile

Open Access Article

23 - Studying the Relationship between Default Risk and Corporate Governance Indicators (Using the Black-Scholes-Merton Option Pricing Model)
Mir Feiz Fallah Shams Maysam Ahmadvand Hadi Khajezadeh Dezfuli

This paper analyzes the role of corporate governance indicators in default risk focusing on data from a 60-‌member sample of firms listed on Tehran stock exchange during 1389 to 1393. In this paper, default risk was calculated by a measure based on the Black-Scholes-Mer More

This paper analyzes the role of corporate governance indicators in default risk focusing on data from a 60-‌member sample of firms listed on Tehran stock exchange during 1389 to 1393. In this paper, default risk was calculated by a measure based on the Black-Scholes-Merton (BSM) option pricing model, where a firm’s default risk is derived from the market prices of its shares. This method overcomes some of the problems associated with the default risk measures used in prior studies. Moreover, corporate governance indicators were divided into four categories: (1) shareholders’ and stakeholders’ rights, (2) board of directors and its committees, (3) auditing, and (4) transparency and public disclosure. Based on each of these categories, a representative index, and by aggregating four representative indexes, a composite corporate governance index was built. Then, the relationship between these indexes and default risk was examined. Results suggest that only governance indicators relating to transparency and public disclosure, at 5% level, are significantly correlated with default risk. However, combining these indicators with other governance indicators (that is, indicators related to shareholders’ and stakeholders’ rights, board of directors and its committees, and auditing), did not have any significant influence on default risk of Tehran stock exchange listed firms. Manuscript profile

Open Access Article

24 - Providing a model for pricing oil parallel forward securities based on Black and Scholes option pricing model
Hamed Najafi Ghasem Nikjou Kamran Salmani

Nowadays the energy is considered as driving sector of economy. Forecast of 150 billion dollar in energy sector during the fifth development program and banking and financial system requires a dynamic and modern economy and financial tools. However, this approach requir More

Nowadays the energy is considered as driving sector of economy. Forecast of 150 billion dollar in energy sector during the fifth development program and banking and financial system requires a dynamic and modern economy and financial tools. However, this approach requires removing legal barriers and modification of the contract. Financing in the oil industry in recent years has faced with serious challenges. The joint investment in oil and gas fields is indispensable. Thus designing of a new contract with the Ministry of Petroleum oil bonds known parallel forward security, tries to raise funds needed. In this article we look at a proposal of the Ministry of Petroleum pattern for optimum pricing for securities offers based on Black and Scholes option pricing model. To estimate the prices, a proposal is presented based on empirical research and statistical models. Finally, we recommend that according to this model other researchers work on pricing the oil parallel forward securities. Manuscript profile

Open Access Article

25 - The Mediator role of Information Asymmetry in Imperfect Competition Market on the relation between Earnings Forecast Bias & Idiosyncratic Risk derived from Capital Assets Pricing Model
Mohammad Hassani Sanaz Moradi

10.30495/afi.2021.1925455.1016

Theoretically, firms should reduce information risks to provide a transparent environment for different groups in capital market to make decisions. Therefore, identifying potential risk factors is important. This paper investigated the impact of earnings forecast bias a More

Theoretically, firms should reduce information risks to provide a transparent environment for different groups in capital market to make decisions. Therefore, identifying potential risk factors is important. This paper investigated the impact of earnings forecast bias and information asymmetry in imperfect competition market on the idiosyncratic risk. It is used the standard deviation of residuals extracted from capital asset pricing model to measure the idiosyncratic risk. Earnings forecast bias is measured based on the absolute value of difference between actual value and forecasted value of earnings per share scaled by the beginning stock price. In addition, information asymmetry is assessed based on the stock price bid-ask spread. Using filtering method, 147 firms listed in Tehran Securities & Exchange during 2013 to 2018 selected as research population. Research hypotheses analyzed through multivariate regression models. Research results showed that more earnings forecast bias lead to increase the idiosyncratic risk. In addition, high level of information asymmetry caused to increase the idiosyncratic risk. Also information asymmetry lead to strengthen the positive relation between earnings forecast bias and idiosyncratic risk. As a whole, firms with high level of earnings forecast bias & information asymmetry as inverse proxies of information quality which have worse information environment have more idiosyncratic risk. Manuscript profile

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