Capital market anomalies and Portfolio – selection Strategies in the Tehran stock market

Subject Areas : Journal of Investment Knowledge

Shahnaz Nayebzade ¹ (M.A Graduate of IAU, Yazd Branch)
Qodsiyeh Mahmoudi Kohani ² (M.A Graduate of IAU, Yazd Branch)

Received: 2013-02-13 Accepted : 2013-05-15 Published : 2013-05-15

Keywords: Overreaction, market anomalies, pricing, portfolio, Contrarian Strategy,

Abstract :

There are numerous studies concerning market anomalies and capital market inefficiencies. The existing evidences challenge the efficient market hypothesis and declare that investors overprice the winners’ stocks while the losers’ are under-priced. This deficiency will be discovered by the market after a few times and there will be a balance then. The purpose of this paper is to present a new strategy of portfolio selection. This study is an applied research and covers eight years (1382-1389) of 60 firms listed on Tehran Stock Exchange. The findings reveal that the higher the stock prices of the firms with higher (lower) abnormal accumulated return, the higher (lower) they are priced and finally their return in long-term will be lower (higher). Considering this issue leads to the profitability of the portfolio.