Analysis of Arbitr
Analysis of Arbitrage Pricing Theory to Predict Stock Returns during and after the Stock Market Bubble in Tehran
Zahra sarlak *1, Morteza Ghasemi 2, Mohammahe Skandari 1, Hamid Reza Malek Hossini 1, Jafar Nekounam 1
*1. Department of Accounting, Science and Research Branch, Islamic Azad University, Khomein, Iran
2. Department of Accounting, Arak Branch, Islamic Azad University, Arak, Iran
Abstract Understanding the mechanism and efficiency of a risk and return in capital markets, is one of the important issues that have attracted the view of financial user for long time. Pattern introduce the process of return, risk and return relationship of various factors as independent. Among these models there are capital asset pricing model (CAPM) and arbitrage pricing. This study uses two basic hypotheses to test the arbitrage pricing theory of capital market in the period of 1999 to 2008 in Tehran. First the number of factors that influence the efficiency is estimated that involved 13 in the pre-bubble, 12 in the bubble period and 14 after bubble period. The main purpose is the test arbitrage pricing theory (APT) technique using factor analysis and the efficiency of the odd week, and finally with an average balance equation obtained by even weeks were analyzed to estimate the model predictive power The results should that there is no significant difference between the mean squared errors of odd and even days with the 95 confidence Research findings suggest that the arbitrage pricing. Theory is true only in the bubble period, and Iran’s stock market returns is affected of two-factor model, these two factors supply 48.6 percent of total output fluctuations.
[Zahra sarlak, Morteza Ghasemi, Mohammahe Skandari, Hamid Reza Malek Hossini, Jafar Nekounam. Analysis of Arbitrage Pricing Theory to Predict Stock Returns during and after the Stock Market Bubble in Tehran. Life Sci J 2013;10(7s):92-98] (ISSN:1097-8135). http://www.lifesciencesite.com. 16
Keywords: arbitrage pricing theory, bubbles, risk, efficiency.