*Master of Accounting, Instructor at Payam-e-Nour Univesity, Khodabande Branch
**Master of Business Management, Department of Administrative Sciences and Economy, University of Isfahan
Online published on 31 May, 2014.
Investment is vital for economy in the development path and collecting small and large capitals as well as constitution of appropriate capitals for economic activities are the requirements in this regard. Today, it is essential to emphasize on liquidity besides the risk and return due to the existing risks in financial markets and the investors and market activists’ demand for cash. Therefore, the present study investigated the relationship between liquidity and three factors of Fama and French model with stock returns in Iran's capital market. To this end, the information of 72 companies listed in Tehran Stock Exchange during five years for the time period 2009–2013 was studied. The obtained results indicated a negative and significant relationship among risk premium, ratio of book value to stock market value and firm size with excess stock returns. Moreover, stock liquidity as risk premium factor has a negative and significant relationship in explaining the excess stock returns.
Stock Return, Liquidity, Risk Premium, Bid-asked Spread, Size, Ratio of Book Value to Stock Market Value
