Return Momentum:Evidence from Tehran Stock Exchange

In this research, stock's return momentum (as one of the most challenging issues of finance in the past 2 decades) is studied on Tehran Stock Exchange. The methodology of examining momentum includes forming of 6438 portfolios and testing the mean of these portfolio returns statistically during a 10 year period from 2002 to 2011.The evidence shows in a sample consisting of 94 listed companies which constitutes majority of market capitalization of Tehran Stock Exchange, trading strategies based on return momentum are profitable in midterm. Fama-French (1993) three factor risk model cannot explain momentum in medium term and momentum excess return after adjusting for risk is a challenge to efficient market hypothesis. Therefore, midterm return momentum can be explained by behavioral models and market under reaction can result in momentum. In long-term, return momentum disappears and returns of strategies formed based on return momentum is close to zero and insignificant.