The Effect of Profitability Skewness on Stock Return Prediction-Study Case: The Tehran Stock Exchange Listed Companies.

Investors, as one of the main elements of financial markets, have always looked up for a performance evaluation criterion for various companies. One of the most important performance criteria, is stock return. Considering the deployment of capital market, identifying the factors affecting stock return, is of a great significance. Researchers have always been looking for variables with which help the stock return behavior can be explained. Accounting profit is amongst accounting information which is used to predict stock return. The purpose of this research is to investigate the effect of profitability skewness on stock return prediction. In this regard, to explicate the relationship between profitability skewness and future stock return, three perspectives including behavioral explication, growth opportunity and future profitability have been used. To test the hypotheses, a sample of seasonal data from 127 Tehran Stock Exchange listed companies was selected from 2009 to 2017. The method used to test the hypotheses is two-step Fama-Mac Beth regression using the panel data. The results from testing hypotheses show that the skewness of profitability considering three criteria: gross profit, earning per share to price ratio, and net profit, has a significant and negative effect on future stock returns.