The Relationship between Earning, Dividend, Stock Price and Stock Return: Evidence from Iranian Companies

Abstract

The purpose of this paper is to investigate whether the current period earning divided by stock price at the beginning of the stock market period, current period dividend divided by stock price at the beginning of the stock market period, prior dividend divided by stock price at the beginning of the stock market period and the reverse of stock price at the beginning of the stock market period are relevant to explain stock market returns in Iran. We used cross-section, pooled data and panel data regression models for testing the effects of the above variables on stock returns. The results show that in some years, shareholders pay special attention to dividends and also the variable prior dividend divided by stock price at the beginning of the stock market period affects stock return. Moreover, there is a significant relationship between current period earning divided by stock price at the beginning of the stock market period and stock return. Thus, results theoretically support the existence of relationship between earning, dividend and stock return.

Keywords: earning, stock return, Tehran Stock Exchange, stock price, earning per share