Exploring Firm's Information to Predict Future Unexpected Events

Unrealistic investor optimism leads to overestimation of desirable unexpected events and underestimation of undesirable unexpected events. This optimism leads to overpricing of stocks in the face of unexpected events and can lead to severe losses for investors. Therefore, predicting unexpected events can be useful in formulating an appropriate trading strategy. The purpose of this study is to investigate the factors predicting desirable and undesirable unexpected events. In the present study, Fama and Macbeth regression (۱۹۷۳) and portfolio analysis were used. For this purpose, the information of Tehran Stock Exchange and OTC Iran companies during the years ۲۰۰۵ to ۱۳۹۸ have been used. The results of the present study show the ability to predict desirable unexpected events with past information of desirable unexpected events and other firm's characteristics. In addition, the firm's characteristics like size and the book to market value also explain the desirable unexpected events. Undesirable unexpected events can also be predicted by the past information of undesirable unexpected events and some firm's characteristics.

Keywords:

desirable unexpected events , undesirable unexpected events size , idiosyncratic volatility.