THE STUDY OF INVESTORS OVERREACTION ERROR ROLE IN OCCURRENCE OF VALUE PREMIUM IN IRAN CAPITAL MARKET

The value premium or value stocks return surplus to growth stocks is one of capital market anomalies. However this anomaly has verified in many capital markets in the world, there is some controversy about its reasons. This study investigates whether after control for growth and value stocks risk, there is any evidence of investors’ overreaction to past financial performance of growth and value stocks or not. Performance measures in this study include sales growth, earning growth and past stocks return. In order to conduct this study, a sample including 121 firms during the period of 1380 to 1389 in the form of two 5-year-period, is selected. For testing the research hypothesises, both portfolio test method and regression method with panel data has been used. The results of this study shows that investors behavioral errors is not the reason for value premium in Iran capital market, but there is a direct relationship between risk and return of growth and value stocks which confirms the rational justification of value premium occurrence.