The Effect of Uncertainty Level on Stock Prices Reaction to the Good News and Bad News during Business Cycles

The main purpose of the present research is to investigate the reactions of stock prices to good and bad news during economic expansions and recessions under different levels of uncertainty. The study period is between the years 1385 to 1390and the population of the study is 111 companies listed in Tehran Stock Exchange (TSE). We use Generalized Method of Moments and Partial Least Squares method to analyze the research variables. The results show that high or low uncertainty is not effective in the reaction of stock prices to bad news in time of prosperity. Also the results suggested that when good news arrives during recessions، higher uncertainty of investors leads to relatively smaller price increase and vice versa.