Investigating the role of using the concept of classification in establishing the relationship between convergence and the trend of stock movements in listed companies in Tehran Stock Exchange

Subject Areas : Financial engineering

Leila Safdarian ¹ (Department of accounting, Khorasgan (Isfahan) Branch, Islamic Azad university)
Darush Foroghi Foroghi ² (Associate Professor, Accounting Department, University of Isfahan)
farzad karimi ³ (Associate Professor, Department of Economy and Management, Mobarake Beranch, Islamic Azad university)

Received: 2016-10-24 Accepted : 2017-01-13 Published : 2017-06-22

Keywords: Comovement, Style Return, Style Investment, Momentum,

Abstract :

The main goal of present study is to investigate the relation between co-movement and momentum in Tehran Exchange`s Listed companies during 1384-1393.For this purpose with following Wahal and Yavuz (2013) study,   the style is constructed and the co-movement of each stock with its style was accounted and then the   standard approach in the momentum literature is used. Following Jeegadeesh and Titman (1973) method for identifying winner and loser portfolio at the end of each month, the stock is ranked based on their 6 prior period return and the relation between co-movement and momentum is examined. Findings show that there is a meaningful relation between co-movement and (3, 6, 12) prior return in winner high co-movement and loser low co-movement portfolio. Furthermore, in winner high co movement portfolios, with increasing the range of past return, the effect of co-movement on past return will expand. On the other hand, in loser low co movement portfolios with increasing the range of past return the effect of co-movement on past return will decrease.