Testing the Efficiency and Price Bubble of Tehran Stock Exchange Using Filter Rule and CAPM

The stock market is the most important part of the financial market in a country. The main rule of stock market is to attract and lead savings and liquidity to optimum goals. In fact, the basic duty of stock market is optimal allocation of scarce finance resources. In other words, major part of funds should be attracted by the most profitable works and projections in it. The main characteristic of stock market which fulfills that goal is efficiency. Due to the important role that information plays in the efficiency of securities exchange market, the efficiency of the market is investigated in three different forms which are as follows: 1) information about previous price changes 2) the whole sum of general published information and 3) the general published information and private information. According to these three types of information, the efficiency of the market is tested at three levels entitled “Weak”, “Semi-Strong” and “Strong”. This study tested the efficiency using filter rule (an operative approach for testing weak form of efficiency). Furthermore, it investigates price bubble after depression period in Tehran stock market by using CAPM approach. The results of this study demonstrate that Tehran stock market is not efficient in the weak form of efficiency during 1383:1-1386:3 and also the measure of efficiency in years 85 and 86 is less than 83 and 84. However, price bubble vanishes in this market and prices are being close to its intrinsic values.