An Investigation of Relationship between Management Forecast Error with Abnormal Rate of Return and Systematic Risk at Tehran Stock Exchange

Meshki, Mehdi; Asi Rabbani, Mahmoud

doi:10.22059/acctgrev.2013.25036

An Investigation of Relationship between Management Forecast Error with Abnormal Rate of Return and Systematic Risk at Tehran Stock Exchange

Authors

10.22059/acctgrev.2013.25036

Abstract

The earning forecast has long consumed the attention of investors, managers, financial analysts, researchers and providers of credit. The main source of information for investors, creditors and others active in the stock market is the forecasted earning in the statements issued by the companies themselves. This paper explores the link between ownership management forecast error with abnormal return among and systematic risk among Irans’s listed companies (Tehran Stock Exchange). We employ financial data of 75 firms listed in Tehran Stock Exchange during 1383 to 1389. Panel Data methodology is used in order to test the hypotheses of this research. Moreover, the effect of the other parameters including the firm size, profitability, financial leverage, book value per market value ratio and Altman's Z score were investigated by introducing them in the model parameters. This paper contains significant and consistent results. The results of testing hypotheses for each of the seven years and the pooled sample show that there is a positive linear relationship between management forecast error and Abnorma return. This study suggests that there is no existence of a linear relationship between management forecast error and Systematic risk.

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