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THE CORRELATION BETWEEN FIRM SIZE AND

STOCK RETURN OF THE COMPANIES IN THE INDEX

OF 50 MOST ACTIVE FIRMS LISTED ON TEHRAN

STOCK EXCHANGE

Zeinab Kazemi1 and Amirreza Kazemikhasragh2

1

Student of Master's Degree in Financial Business Administration, Islamic Azad University,

Abhar Branch

Email: zeinabkazemi1987@gmail.com

2

Student of Bachelor's Degree in Economics, Islamic Azad University, Central Tehran

Branch

Email : a.kazemi1984@gmail.com

ABSTRACT

This research aims to study the correlation between risk variables on stock

return of the companies in the index of the most active firms listed on Tehran

Stock Exchange. For this purpose, the correlation between firm size and

stock return of the companies in the index of the most active firms listed on

Tehran Stock Exchange for the period from 2001 to 2011 has been studied.

To take a sample, the index of 50 most active companies has been used.

Thereafter, the regression model has been applied to estimate the

correlation of the firm size with the stock return of the companies in the said

index.

The results show that there is a positive and significant (weak) relation

between firm size and stock return when fluctuations in the index are not

considered. When the return on the index is inserted in the model, this

relation remains positive and significant. Moreover, this research shows

that the return on the index of 50 most active companies has not effect on the

firm size and fluctuations in stock returns (β).

Keywords: Risk, Stock Return (β), Different Economic Conditions, Index

of 50 Most Active Companies, Firm Size

JEL Classification: G1, G11, G14, G32.

RESEARCH PROBLEM

The most important concept in making decisions on investment is the issues of risk and

return. Any share or portfolio of shares purchased, maintained, and sold within a specified

period brings the owner a specific amount of returns including change in price and profits

arising out of ownership (Rai and Saidi, 2004). On the other hand, return of stock...