Examination of the Effect of Skewness and Excess Kurtosis on Stock Returns Description through Capital Asset Pricing Model

This article examines the relationship between return, systematic risk, skewness and kurtosis in Tehran stock Exchange during 2001-2007.Similar research, in this field, shows different results on upward and downward markets, therefore the period under study is divided into sub periods including upward market (2001-2004) and downward market (2004-2007) and the relationship between these sub periods independently are examined. Regarding to this approach, totally 64 firms from different industries are selected. Then daily price and market index data were collected. Findings indicate that beta and skewness play an essential role in describing stock return in both periods. However, in the upward market, excess kurtosis has a significant relationship with the stock returns but in the downward market there is no such relationship.