Effect of Different Levels of Liquidity Measures on the Premium Stock Returns Using the Four-Factor Model of Fama and French

In this study, The Effect of different Level measures of stock liquidity on the Premium Stock Returns have been tested. Independent variables in this study are Trading turnover ratio, adverse selection of bid- ask Spread and bid- ask Spread, these were also measures of stock liquidity. The Premium Stock Returns is the dependent variable and size, market risk and the book-to-market was cons idered as control variables. The stock liquidity measures, formulation of hypotheses and the sample consists of 70 companies listed in Tehran Stock Exchange for the period 2005 to 2011 were selected. To test the hypothesis the Fama and French (1993) four-factor model was used. Methods of portfolio companies were categorized based on stock liquidity measures taken. The ranking was based on different levels of liquidity. So, liquidity factor will have (or lack) a different effect on the Premium Stock return. The results of this Paper, help the investors According to liquidity measures and their Premium Stock Returns.