A STUDY OF RELATIONSHIP BETWEEN MEASURE OF AMIHUD ILLIQUIDITY AND STOCK RETURNS IN TEHRAN STOCK EXCHANGE

Abstract

The main objective of this study is examining the relationship between measure of Amihud illiquidity and stock returns in Tehran Stock Exchange (Iran). The basis of this measure is that if the stock price changes in reaction to a small volume of stock trading be significantly, Stocks will have lower liquidity (it means that measures of Amihud Illiquidity for it is high). Amihud illiquidity measure calculates stock market price reaction to order flows. In fact, this study seeks to answer the question that could Amihud illiquidity measure plays a significant role in stock returns of companies or not? For this purpose were collected the data of the 30 companies listed in Tehran Stock Exchange for the period 2006 to 2012 monthly. Research results show that there isn't significant relationship between returns and Amihud illiquidity measure.