Analysis of Mean-Reversion TendencyofStock Prices for Companies Listed in Tehran Stock Exchange 1

In securities exchange markets, different anomalies usually occur that can make the market quite inefficient. One of these abnormalities is mean-reversion tendency. The present study aims to determine mean-reversion tendency of the main indices of Tehran stock exchange (TSE). This was a descriptive analytical study with the statistical population of all companies listed in Tehran Stock Exchange Market (TSEM)during Jun 1997 to April 2012.The census sampling was done. The sample size was equal to the statistical population. Data collection instruments included the custom stock exchange tools of RahAvard Novin (version 3, Mabna Co., Iran) and Eviews (Version 7, HIS Inc., USA). Furthermore, Internet resources were used to gather related data as well as accessing the above-mentioned instruments. In order to analyze data, Augmented Dickey-Fuller (ADF)test was used to prove persistent or mean-reversion tendency of time series. Findings showed that the cash return- stock price index has significantly returned to the meanduring2003-2004 (p = 0.040) and 2011-2012 (p = 0.002).In 50 top companies, mean-reversion tendency was also significant during2004-2003 (p = 0.036) and 2012-2011 (p = 0.013). In addition, general index of TSE has returned to the mean value during2003-2004 (P = 0.023). Results of this study show that TSEM has lacked the required efficiency in some time periods. Instabilities of exchange can be because of market-influencing factors such as inflation, fluctuations of world oil price, base currency, and economic sanctions.