Investigating the Effects of Predicted Profits on Stock Price of Listed Companies in Tehran Stock

The main purpose of investing is getting return. Return consists of dividends and increase in stock price. Changing in stock price for investors is very important and factors like predicted profits may have an effect on stock price. So predicted profit for investors is important and this information can help them make better decisions or affect their decisions about buying, selling or holding a stock. Reactions of investors to predicted profit affect the market.
In an efficient market, stock price reflects all information, and determining the real price of stock is the most important task of market; in non-efficient market some information and reactions of real and potential investors may affect stock price. Predicted profit may also affect volume of stock transaction and numbers of stock buyers. The study includes 153 Companies during the period of 1380-1392. Data is analyzed using Panel data; furthermore, the correlation between variables are investigated using regression. The aim of this paper is to investigate the effects of predicted profits on stock price of companies listed in the Tehran Stock Exchange.
Research Hypotheses: Research hypotheses are described as below: 1. There is a significant relationship between predicted profits and stock price.
2. There is a significant relationship between predicted profits and volume of stock transactions.
3. There is a significant relationship between predicted profits and number of stock buyers.
Research In order to achieve the objective of the study we have used data of 153 listed companies on Tehran Stock Exchange for the period of 1380-1392 to test the above hypotheses. Collected data were analyzed with Eviews econometric software. The panel regression was used to test the hypothesis.
Variables are: predicted profit, stock price volume of stock transaction and number of stock buyers.
The results of regression analysis of the first hypothesis show that there is a positive relationship between predicted profits and stock price. At the beginning of the period one percent increase in predicted profits caused 18percent increase in stock price at 95 percent confidence level, but at the end of the period one percent increase in predicted profits resulted in 18 percent increase in stock price at 95percent confidence level.
The results of regression analysis of the second hypotheses show that there is a positive relationship between predicted profits and volume of stock transactions; at the beginning of the period one percent increase resulted in 22 percent increase in volume of stock transaction at 95 percent confidence level, but at the end of the mentioned period one percent increase in predicted profits caused 36 percent increase in volume of stock transaction at 95 percent confidence level.
The results of regression analysis of the third hypothesis show that there is a positive relationship between predicted profits and number of stock buyers. At the beginning of the period the Coefficient was not meaningful, but at the end of the period at 90percent confidence level, one percent increase in predicted profits caused 6 percent increase in number of stock buyers.
This study was conducted in order to investigate the effects of predicted profits on stock price of companies listed on the Tehran Stock Exchange. There are some limitations in predicted profit such as lack of the reliable information about companies listed on Tehran Stock Exchange, lack of major trading, companie's transactions were stopped temporary or in short term, because of sending information out of time. The information of companies in different resources is different and integration of this information is very difficult.
The results of this paper can help real and potential stockholders decide properly and also stock market to determine the real stocks prices.