A comparison between the risk of growth and value stocks for the firms listed in the Tehran Stock Exchange

This study tries to answer whether the market risk is more associated with the systematic risk of value stocks than growth stocks, and also investigates the prediction power of the systematic risk of value and growth stock in the forecasting of market risk. The investigation is performed using both cross-sectional and pooling methods for a sample consisting of 274 Iranian firms listed in the Tehran Stock Exchange during the period 2000-2008. In this study, to examine the relationship between market risk and the systematic risk of value and growth stocks, the time period is divided into four categories, including recession, trough, expansion and peck. Moreover, conditional capital assets pricing model (CCAPM) is used to investigate the prediction power of the systematic risk of value and growth stocks in the market risk’s forecasting. This study does not provide conclusive evidence. In the other words, the results indicate that, for firms listed in the recession group, market risk is more correlated with the risk of growth stocks than value stocks while, for the firms listed in the trough and expansion groups, market risk is highly associated with value stocks’ risk. Moreover, there is no significant relationship between these measure and market risk for the firms which listed in the peck group. Furthermore, the results reveal that value stocks are not superior to growth stocks in the forecasting of the market risk.