The Effect of Variations in Uncertainty under Different Economic Conditions on Stock Price in Listed Companies in Tehran Stock Exchange

Stock Market responses to advertisements and news in different ways. People’s expectations are subordinate to their predictions which sometimes involve inefficiency. Exploration of the source of these inefficiencies may have major applications in studying investors’ rationality and efficiency of market. This study is generally aimed to investigate the responses of investors to good and bad news under conditions of expansions and recessions assuming the presence of market uncertainty. This study attempts to help potential and actual investors identify chances and risks of investment by indicating to the relation between abnormal return and the investors’ expectations under different economic conditions، The research period includes 7 years since 2003 till 2009، and statistical samples include 104 companies which are listed in Tehran Stock Exchange (TSE). The results show that high or low uncertainty does not affect on the response of stock price to bad news in expansions. The results also indicate that in recession periods، higher uncertainty leads to a smaller price response to good news and this result is consistent with theoretical fundamentals of study.