Abnormal Stock Returns and Investors' Expectation for Future Volatilities in Stock Market UsingBayesian VAR Impulse Models

Most investors deal with a problem nowadays due to excessive dependence on return facts and figures, andabnormal accounting profits when they want to decide on investment processes. Stock market liquidity,reduction in future volatilities in the stock market, and selection of capital structure are substantial factorsbecause investment efficiency, improved economic conditions, and stock price dynamism become actualwhen producers, investors, and participants are aware of prices in the market. It means that marketinformation reflects prices. The information enhances individuals' investment in better decision-making.However, lack of transparency and future oscillations in the stock market cause higher trade costs and loss,lower liquidity, less stock return, weaker market systems, and lower trading profit. The mentioned tradesdisturb market transparency and investors' security. Hence, investigation of abnormal stock returns andinvestors' expectations for future volatilities in the stock market play a vital role in keeping stability in thecapital market, which is one of the most important financial markets. The extant study analyzed informationfrom 130 firms listed on the Tehran Stock Exchange from 2014 to 2020 to examine the impact of abnormalstock returns and investors' expectations on future volatilities in the stock market by using Bayesian VARimpulse models. The results of the model estimate indicated that abnormal returns had a positive andsignificant impact on future volatilities in stock markets reflecting the influence of abnormal returns increating fluctuation in the market.

Abnormal Stock Returns and Investors' Expectation for Future Volatilities in Stock Market UsingBayesian VAR Impulse Models Keywords:

Abnormal Stock Return , Investors' Expectations , Future Volatilities , Bayesian VAR ImpulseModels