A Comparative Assessment of Earnings Quality Features in Predictig Excess Returns of Firms Listed in Tehran Stock Exchange

Document Type : Original Article

Authors

1 Professor of Finance, Faculty of Management, University of Tehran, Tehran, Iran

2 Professor of Finance and Director of Planning and Management, Tarbiat Modares University, Tehran, Iran

3 Assistant Professor of Accounting, Accounting Department, Raja Higher Education Institute, Qazvin, Iran

Abstract

Abstract: This research investigates the effects of earnings quality features on the excess returns of firms listed on the Tehran Stock Exchange during 1386-1394. In other words, it measures and compares the predictive power of each of the earnings quality feature and management capabilities in predicting stock excess returns. The statistical population consists of all firms listed on Tehran Stock Exchange while the sample size was 105 firms. The method of testing the hypotheses was econometric panel data using E-views software. The results show that at the 95% confidence level, except for the variable of non-optional accrual, the remaining six earnings quality features and management capabilities are able to predict the firms's excess returns and have positive effects on the excess returns.The results indicate that the predictive power of the independent variables are different. In addition, the results imply that the accrual quality with a R2 value of 98% is the best predictor for the stock excess returns in the Tehran Stock Exchange.

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