Stock Return And Modigliani–Miller Valuating: Revisiting the Fama and French

Document Type : Original Article

Authors
Sima Ashouri 1
Mohammadreza Rostami 2
1 Faculty of Social Science and Economics, Alzahra University, Tehran, Iran (Corresponding Author)
2 Faculty of Social Science and Economics, Alzahra University, Tehran, Iran
Abstract
In the present study,we examined the effect of the expected investment, expected profitability and the book to market ratio on the market expected returns.
Fama-French model(2006) was used To calculate the Expected profitability and the expected investment. expected return, market value and book to market ratio was calculated by conventional methods. with the aim of increasing comparability, the two growth variable number of shares and equity book value growth also has been used separately. study was conducted in two stages regression so that the first stage regressions to estimate the expected investment and profitability expected and second stage regressions also is used to examine the relationships between variables.
The results show that there is a significant positive relationship between the expected return and the expected profitability and book to market ratio. The relationship between the expected return and the expected investment is significant negative. The results confirmed all the hypotheses.
 
 
Keywords
Expected Investment
Expected Profitability
Expected Return
Book-to-Market
Fama and French
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