Investigation of the Halo Effect Phenomenon in the Iranian Capital Market with Emphasis on the Role of Accounting Information

Prospect theory and reference point are some of the discussed issues in the behavioral finance paradigm that describe the situation of individuals in decision making. Experimental evidence indicates that investors select points as their reference points for their profit and loss decisions making. If the price is lower than the reference point, they postpone their sales, as a result, the volume of transactions is also reduced, and if the price is higher than the reference point, they sell shares, which results in increased trading volume. The purpose of this study is to investigate thirty examples of Halo effects in the Iranian capital market with the emphasis on the role of accounting information in companies listed in Tehran Stock Exchange. The statistical population includes 115 companies that were active in the stock market from 2006 to 2017. In this study, the panel-data regression model was used to investigate the hypotheses. The results show that investors in the Iranian capital market do not use the management forecasts (relative profitability status of the company vs. the anticipated profitability of the company) following the pattern of the Halo effect phenomenon. In addition, investors in the Iranian capital market do not use the industry average (relative profitability status of the company vs. the industry average) following the Halo effect phenomenon.