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Extreme Positive Daily Returns in Tehran Stock Exchange

Mashadi, Saeid | 2018

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 51782 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Talebian, Masoud; Seif, Mostafa
  7. Abstract:
  8. Bali, Cakici, and Whitelaw (2011) have shown that U.S. stocks with extreme positive daily returns in a month will underperform in the next month. Following Bali et al. (2011), a number of researchers have tried to explain the main causes of this anomaly, also referred to as the “MAX Effect”. The MAX effect is often believed to be the result of investor sentiment and overreaction in financial markets. Bali et al. (2011) argue that the classical asset pricing models are unable to explain the cause of MAX effect. Studies have shown that the MAX effect is also prevalent in other stock markets around the world. Some researchers have performed similar analysis to Bali et al.’s (2011) and have confirmed the existence of the MAX effect in other countries. This study investigates the negative relationship between extreme positive returns and future returns in the Tehran Stock Exchange, which has many different characteristics, such as the 5% price limit rule, compared to similar emerging markets. The results reported in this study show no sign of the MAX effect in the Tehran Stock Exchange, which might be a result of the special rules existing in the Iranian financial market
  9. Keywords:
  10. Maximum Effect ; Asset Pricing Model ; Efficient Market Hypothesis ; Arbitrage Pricing Theory (APT) ; Market Return ; Stock Market ; Emerging Market

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