Empirical Investigation of the Net Operational Asset Levels Efficiency in Prediction of Future Stock Return

Abstract

The general purpose of this research is studying the relationship between net operational assets (actual levels, expected and unexpected) and future stock return in Tehran Stock Exchange listed companies over the period 2008-2012. To test the research hypotheses, the multiple regression modules using Panel data methods were employed. Findings indicate that future stock return is a function of net operational assets; meaning that future stock returns can be predicted based on various levels of net operational assets. This relationship is significant and direct on both actual and expected levels of net operational assets, while at the same time; a significant and reverse relationship is present at the unexpected level of the net operational assets. Conclusively, as net operational assets at both actual and expected levels increase (decrease), future stock returns increase (decrease) as well; yet, as differences in levels of actual and expected net operational assets increase (decrease), future stock returns decrease (increase); in other words, an increase (decrease) in deviation of expected and actual levels of net operational assets, ends in a decrease (increase) in future stock returns.