Earning Response Coefficient (ERC) in Tehran Bourse

Researches about the relation between Return and EPS since 30 years ago, mention that Return is affected by Earning and information related to it. Several researches have studied the relationship between return (as dependent variable) and earning (as independent variable), using regression model. Some researchers have reported a distinct coefficient in regression analysis when they studied the effect of unexpected annual earning as independent variable on abnormal return as related variable. In this research, the effect of DPS on return is considered and measured, in high and low return companies in Tehran Stock Exchange, in 2006&2010. Our evaluations through 5 hypothesis showed that the market didnt have any over orunder reaction versus good or bad news. In the other hand, market reaction was not emotional. The results of this research detected a considerable difference between ERCs in high-return and low-return companies. But they didnt approve any significant relationship between news and market reaction; except for relationship between bad news and market reaction just in low return companies. It means that the market under reacted only versus bad news related to lowreturn companies.