The Relationship of Firm Fundamentals and Historical Prices with Stock Price Movements

Recognizing variables which are able to explain stock price movements is a very important matter for the capital market activists. Three main groups of variables that seem to have a significant role in this explanation are: 1) Fundamental Variables 2) Historical Stock Price Returns 3) Macroeconomic Variables. This research investigates the relationship between these three groups of variables and stock price returns on the listed companies of Tehran Stock Exchange. Moreover, the complementary role of fundamental variables and historical stock price returns in explaining stock price movements is investigated. Eventually the difference between the roles of fundamental variables and historical stock price returns in large and small firms is studied. According to the results of the present research there is a significant relationship between all three mentioned groups of variables and stock price movements and also fundamental variables and historical stock price returns are complementary variables for explaining stock price movements. Moreover, the growth variable is more important in small firms compared to larger firms for interpreting stock price movements.