Development of Asset Pricing Model Based on Price Impact: Comparison of High-frequency-based Measures

Document Type : Original Article

Authors
Pedram Samiee Tabrizi 1
Mahdi Madanchi Zaj 2
HAMIDREZA KORDLOUIE 3
fatemeh samadi 4
1 PhD Student of International Finance, Department of Financial Management and Accounting, Science and Research Branch, Islamic Azad University, Tehran, Iran
2 Assistant Professor, Department of Financial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran
3 Associate Professor Of Accounting And Management department, Islamshahr Branch, Islamic Azad University, Islamshahr, Iran
4 Assistant Professor, Department of Management, Shargh Tehran Branch, Islamic Azad University, Tehran,Iran
10.22034/jik.2025.78343.4704
Abstract
The purpose of this article is to develop the asset pricing model with the price impact approach in the stock market. In this regard, 4 price impact parameters of Kyle (1985), Glosten and Harris (1988), Foster and Viswanathan (1993) and Sadka (2006) were considered as representatives of high frequency data and 2 illiquidity proxy of Amihud (2002) and Pastor and Stambaugh (2003) as representatives of low frequency data. The number of 140 companies in the Tehran Stock Exchange was examined as a statistical sample of the research during the period of 1394 to 1402, and in order to estimate the price effect parameters based on abundant data, the monthly information of the companies' stock transactions was used. The risk factor of stock liquidity based on the parameters and based on the strategy of forming a win-loss portfolio was tested as the sixth risk factor in the Fama and French five-factor model. The results of this analysis showed that the three price effect parameters of Kyle, Foster, Viswanathan and Sadka have a significant role in the asset pricing model and have a significant explanatory power of the expected return and stock price. Also, all three parameters of the mentioned price effect improve the explanatory power of the share price compared to the 5-factor model.
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