Empirical Relation between Risk, Return and Liquidity with Free Float in TSE Listed Companies

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Abstract:
Investors search for profitable investment opportunities with respect to the risk in financial markets. Since investors are willing to sell stocks whenever they want; they invest in liquid stocks with low liquidity risk. The free float is an important criterion that can show liquidity of a single stock. The higher the stock free float، the lower liquidity risk. There is a common sense that the higher the stock free float، the higher the transaction volume and so the higher the risk and also the higher the expected return. In this paper، the relasionship between risk، return and liquidity is tested with free float in Tehran Stock Exchanges (TSE) listed companies. Free float is calculated quarterly in TSE. So، data gathered from 2004 to 2008 quarterly for 111 TSE listed companies. With Eviews 6 and in form of panel data، analysis is done. Using OLS and GLS، no significant relationship is confirmed between risk and free float and no significant relationship is confirmed between return and free float. But significant relationship is confirmed between liquidity and free float. By using inverse regression in form of GLS، although it is not justifiable in practice، a significant relationship is confirmed between risk and free float.
Language:
Persian
Published:
Financial Research, Volume:14 Issue: 34, 2013
Pages:
65 to 80
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