Predictive Ability of Firm Profitability by Book-to-Market Ratio in the Tehran Stock Exchange Market

It is necessary for great progress of any country in economic development that people invest their surplus income in existing & new industry on that country. So, each investor needs information about the shares in order to achieve the share with the high output and the low risk. These information are either the internal information of company in its financial statement which is reflect in income statement and balance sheet or external information that is listed in stock exchange. These internal or external factors have impacts on shares output and determine the Price of the stock in the markets. In this paper, book value is internal information and market value is external information. This paper also shows how to choose portfolio of stock based on the book value- to-market value ratio and the return which has been yield from listed companies in Tehran stock exchange market.