A STOCK PRICE CRASH RISK EXPERIENCE AND ITS EFFECTIVE FACTORS IN COMPANIES LISTED IN THE TEHRAN STOCK EXCHANGE
Journal of Economics and Trade, Volume 6, Issue 1,
Page 40-48
Abstract
Mispricing of assets usually leads to a stock price crash. Therefore, identifying the effective factors of mispricing can facilitate the forecast of this phenomenon and help agents to predict future stock return more accurately and diagnose the price bubble in their portfolio at the right time. In this way, they maintain low-risk stocks and reduce stock price crash risk. This study aims to study the experience of stock price crash risk in companies listed in the Tehran Stock Exchange over the period 2009-2020. For this purpose, the generalized method of moments (GMM) is used. Monthly data are used for the research. The results indicate a positive and significant relationship between stock price volatilities, stock price crash risk, and future stock return.
Keywords:
- Financial risk
- stock price crash
- price volatility
- trading volume
- generalized method of moments (GMM)
How to Cite
BOGHZIAN, A., MIRLOUHI, M., ASGARI, N., & KHAJEH, M. (2021). A STOCK PRICE CRASH RISK EXPERIENCE AND ITS EFFECTIVE FACTORS IN COMPANIES LISTED IN THE TEHRAN STOCK EXCHANGE. Journal of Economics and Trade, 6(1), 40–48. Retrieved from https://ikprress.org/index.php/JET/article/view/6412
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Badavar Nahandi Y, Taghizadeh Khanqah V. Impact of dividend payments and withholding bad news on stock price crash risk by emphasizing information asymmetry. Quarterly Journal of the Iranian Accounting and Auditing Review. 2017;24(1):19-40.
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Newey, W., and K. West. A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix, Econometrica, 1987: 55(1): 703—708.
Tehrani R, Saranj A, Ansari H. A study of the relationship between cross-sectional return and liquidity in the Tehran Stock Exchange. Journal of Economic Research. 2009;11(4): 167-184.
Sunder S. Riding the accounting train: From crisis to crisis in eighty years, Presentation at the Conference on Financial Reporting, Auditing and Governance, Lehigh University, Bethlehem, PA; 2010.
Khodaei B, Beshkooh M. Effect of stock liquidity on firms’ performance and stock price crash risk. Journal of Quantitative Studies in Management. 2016;25:83-102.
Kothari SP, Shu S, Wysocki PD. Do managers withhold bad news?, Journal of Accounting Research. 2009;47:241–276.
Jin L, Myers SC. Around the world: New theory and new tests. Journal of Finance and Economy. 2006;79(2):257–292.
Kim JB, Zhang L. Accounting conservatism and stock price crash risk: Firm-level evidence, Contemporary Accounting Research. 2015;33:412–441.
Lagzian M, Yaghma S. An Empirical Study of the Factors Affecting Customers Adoption of E-banking Services. Monetary and Financial Economics. 2011;17(34):12-37.
Francis JR, Pinnuck ML, Watanabe O. Auditor style and financial statement comparability, The Accounting Review. 2014;89:605–633.
White EN. Bubbles and Busts: The 1990s in The Mirror of The 1920s, Finance research Unit, Institute of Economics, University of Copenhange; 2004.
Hutton AP, Marcus AJ, Tehranian H. Opaque Financial Reports, R2, and Crash Risk, Journal of Financial Economics. 2009;94:67-86.
Morris JJ, Alam P. Value Relevance and the Dot-com Bubble of the 1990s. The Quarterly Review of Economics and Finance. 2012;52(2):243-255.
Narayan PK, Mishra S, Sharma S, Liu R. Determinants of stock price bubbles. Economic Modelling. 2013;35:661-667.
An H, Zhang T. Stock price synchronicity, crash risk, and institutional investors. Journal of Corporate Finance. 2013;21:1–15.
Xu N, Jiang X, Chan KC, Wu S. Analyst Herding and Stock Price Crash Risk: Evidence from China. Journal of International Financial Management & Accounting. 2016;28(3):308–348.
DOI: 10.1111/jifm.12062
An Z, Chen Z, Li D, Xing L. Individualism and stock price crash risk. Journal of International Business Studies. 2018;49(9):1208–1236.
DOI: 10.1057/s41267-018-0150-z
Wu W, Wang L. Institutional Ownership Mispricing and Corporate Investment. Open Journal of Business and Management. 2016;4(2):282-290.
Kumar S. Chauhan Y, Pathak R. Stock Liquidity and Stock Prices Crash-Risk: Evidence from India, The North American Journal of Economics and Finance. 2017;41:70-81.
Dianati Dilami Z, Moradzadeh Fard M, Mahmoudi S. Examining the effect of institutional investors on reductions in stock price crash risk. Journal of Investment Knowledge. 2012;1(2):1-18.
Fallah Shams M, Zare A. Effective factors on a price bubble in the Tehran Stock Exchange. Quarterly Journal of Securities Exchange. 2013;21:73-91.
Vadeei Noghabi MH, Rostami A. The Impact of Institutional Ownership Type on Future Stock Price Crash Risk: Evidence from Companies Listed in the Tehran Stock Exchange (TSE). Quarterly Financial Accounting Journal. 2014;6(23):43-66.
Haghanifar A, Shamakhi H, Haji G. Impact of financial variables on future stock price crash risk in Iranian capital market. The 2nd International Conference on Accounting and Management; 2015.
Eslami Bidgoli S, Shabanpoor Fard, P. The relationship between trading volume and its elements with return by focusing on intraday trades and removing the U-shaped pattern (Case study: Tehran Stock Exchange). Financial Management Perspective. 2016;6(14):45-63.
Badavar Nahandi Y, Taghizadeh Khanqah V. Impact of dividend payments and withholding bad news on stock price crash risk by emphasizing information asymmetry. Quarterly Journal of the Iranian Accounting and Auditing Review. 2017;24(1):19-40.
Anderson TW, Hsiao C. Estimation of dynamic models with error components, Journal of the American Statistical Association. 1981;76:598-606.
Arellano M, Bond S. Some tests of specification for panel data: Monte carlo evidence and an application to employment equations, Review of Economic Studies, Blackwell; 1991.
Fathi F, Beghzian A, Khodaei Valeh Zaghard M. An investigation of the impact of financial crisis on the relationship between debts and banks’ lending behavior by emphasizing banks’ ownership type in Iranian banking industry. Economics, Financial Management, and Accounting Studies. 2018;4(1):84-107.
Sadat Shojaei Z. Impact of actual earnings management and competition in the product market on stock price crash risk in firms listed in the Tehran Stock Exchange. M.Sc. thesis, Islamic Azad University, South Tehran Branch; 2015.
Newey, W., and K. West. A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix, Econometrica, 1987: 55(1): 703—708.
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