Investigating the impact of stock liquidity on stock returns and value of firms listed in Tehran Stock Exchange

Speed and feasibility of assets liquidity are of the determiningrolein making investment decisions in the capital market.some of previous studies indicate that there is a significant relationship between the amount ofliquidity on the one hand and value of firm and stock return on the other.Furthermore, the impact of this characteristic of the securities on those variables that affect the capital market has been the subject of many financial investigations. As such, this study attempted to gauge the impact of stock liquidity on stock returns and value of firms listed in Tehran Stock Exchange. In this study, the relative price gap and thestock turnover rate were considered as measures of liquidity.Besides, the firm size and the ratio of book value to market value were considered as control variables.In this regard, 89 firms were selectedin a 5-year period (2008-2012) as the research sample. Then, the research hypotheses were tested using synthetic regression. The results indicated that the relative price gap and the stock turnover rate, as measures of liquidity, have had a positive relationshipwiththe stock returns and value of firms listed in Tehran Stock Exchange.

Keywords:

Stock liquidity , firm value , stock returns , relative price gap , stock turnover rate , Tehran Stock Exchange