Examination of investor reaction to unexpected economic and political events in Tehran stock market

This study examines the effect of economic and political news on Tehran Stock Exchange during the years 2001 to 2009. In order to investigate the investors’ behaviors, we used the total daily index of stock exchange. The investors’ reaction was evaluated from two perspectives of “Overreaction Hypothesis” and “Uncertain Information Hypothesis”. Results of this study indicate the existence of overreaction in investor’s behaviors in the time of announcing good and bad news in stock market. Also the results shows that the reaction of Tehran stock exchange’s investors to good news is faster than bad news, but changing stock price slope in good news is faster than bad news. Additionally, research results show that investment risk in days after publishing news (even good or bad) has more than normal days.