Explaining the Relationship between Herding Behavior and Momentum with Stock Returns: Evidence from the Iran Capital Market

 Behavioral Finance is a new paradigm in financial markets that recently and in response to problems, that modern financial paradigm is facing, try to explain anomalies events in financial area. Pricing anomalies in pricing models are reported in asset pricing literature as well as in behavioral finance literature. The purpose of this research is examining some other behavioral factors like herding and momentum returns at the industry-level at Tehran Stock Exchange and Iran Fara bourse. By using portfolio methodology at industry-level, and price data of listed companies at Tehran Stock Exchange and Iran Fara bourse during 12/07/2008 to 11/13/2018, herding and momentum returns are calculated for 24 industries that had at least five companies. At the first stage, preliminary results show the existence herding and momentum returns. At the second stage, pooled regression analysis shows that short-term subsequent return (1 month), medium-term  subsequent return (2 month) and long-term subsequent return (3 month), have a significant relationship with herding and momentum returns. At last, Portfolio Study Methodology is used for making stock portfolio based on herding and then momentum and premium subsequent returns of portfolios is calculated. Again, the findings indicate that portfolio with herding and momentum factors has higher return in comparison with the portfolio without mentioned factors, and herding factor result to higher return or momentum portfolios