This research investigates the effect of time on idiosyncratic return and idiosyncratic return volatility in the companies listed in Tehran Stock Exchange during a period of twelve years (from 2001 to 2012). This study uses three-factor model of Fama and French (1993) to measure the idiosyncratic return. Data analysis for this study is conducted using multiple linear regressions with use of panel data. The results show that the idiosyncratic return and idiosyncratic return volatility has decreased over time. This result means that investment risk in Tehran's stock market has gradually decreased over the last twelve years.

Purpose: This paper aims to investigate the pricing of idiosyncratic volatility in the Tehran Stock Exchange. Moreover, it examines whether the explanations proposed by previous studies for the idiosyncratic volatility anomaly in the developed markets can be applied to the evidence obtained from the Tehran Stock Exchange? Method: the sample includes thefirmsthat have positive book values, the non-financial intermediaries, and the firms with the fiscal year ending on the last day of March. Tocalculate idiosyncratic volatility, the firms with trading days less than onece each month are excluded. The final sample consists of 48firmslisted in the Tehran Stock Exchange, over the period from 2008 to 2019. The hypothesis is examined by using the three-factor Fama andFrench (1993) model, the one-way portfolio sorting approach on idiosyncratic volatility, the two-way portfolio sorting on idiosyncratic volatility, and the five risk factor, and Fama and MacBeth (1973) cross-sectional regressions method. Results: suggests a positive and statistically significant relationship between the idiosyncratic volatility and the future stock returns. This result is persistent after controlling for the Fama-French three risk factors (excess market return, SMB, and HML), the short-term reversal factor, the preference for lottery-type stocks, and the momentum factor (Carhart, 1997). Conclusion: there is no evidence of the idiosyncratic volatility anomaly in the Tehran Stock Exchange,therefore, the investors should take into account the idiosyncratic volatility in their investment decisions. Furthermore, none of the explanations in the literature can explain the idiosyncratic volatility positive premium on the Tehran Stock Exchange. Contribution: the idiosyncratic volatility anomaly was investigated mainly for developed markets and other developing countries. Moreover, the existing explanations about the idiosyncratic volatility anomaly have not yet been examined for the Tehran Stock Exchange. Therefore, this study aims to fill this gap to extend the literature on the emerging Tehran Stock Exchange.

The relation between firm's idiosyncratic volatility (IV) and stock returns has been explained by conflicting evidence, the contradiction has attracted the attention of many researchers. The impact of IV on stock return is depending on the stocks’ attributes. Tests have been performed using a panel data model with fixed effects, and the sample of 126 companies listed in Tehran Stock Exchange. The results show that in companies with high performance quality, the firm's IV are directly related to stock returns, and in companies with low performance quality, the firm's IV are inversely related to stock returns. The favorable quality increases the IV, and leads to positive returns, and The non-favorable quality increases the IV, and leads to negative returns. And there is a nonlinear, shaped, relation between stock returns and IV. Increasing the level of IV to a certain level, initially, increases the firm's stock returns, but by increasing it more than before, cause a negative market reaction and a negative impact on stock returns.

This research examines the effect of financial reporting quality on idiosyncratic return volatility in the companies listed in Tehran Stock Exchange during a period of ten years (from 2001 to 2010). In this research, earnings quality index based on Francis (2005) has been used to measure financial reporting quality and three-factor model of Fama and French (1993) has been used to calculate the idiosyncratic return volatility. For data analysis the linear multiple regression with use of panel data has been employed. The results show that financial reporting quality has the inverse effect on idiosyncratic return volatility. Results of the research also indicate that annual stock return, financial leverage and operating cash flow of next year have direct effect on idiosyncratic return volatility. Also the firm size has inverse effect on idiosyncratic return volatility.

According to modern portfolio theory, investors can control idiosyncratic volatility via diversification of investing portfolio. Therefore, it is assumed that investors seek returns only because of systematic risk tolerance. In practice, however, it is observed that idiosyncratic volatility has a price, which is inconsistent with assumptions of modern portfolio theory. The relationship between idiosyncratic volatility and expected returns as well as the factors affecting the pricing of idiosyncratic volatility has been studied so far. In this study, it was attempted to examine how idiosyncratic volatility is priced in Iran’ s capital market by explaining arbitrage risk during the 2007-2017 period. For this purpose, one of the current trading restrictions in Iran’ s capital market as well as other common measurement variables and Fama and French’ s five-factor model were employed to estimate arbitrage risk and idiosyncratic volatility, respectively. This is the first study using Fama and French’ s five-factor model and arbitrage risk in order to price idiosyncratic volatility and asset, respectively. To answer the research question and test the hypothesis, portfolio analysis methods and Fama-MacBeth regression were employed. The results indicated that, while taking into account arbitrage risk, the relationship between idiosyncratic volatility and expected return is significant and negative.

The main objective of this study it to test the relation between stock return and idiosyncratic volatility in the three aforesaid models and compare the explanatory power of stock return by idiosyncratic volatility in each of these models. The sample used in this study obtained through screening method includes 118 companies admitted to Tehran Stock Exchange from 2011 to 2017 and Panel Data method is used to tests hypotheses. The results of hypotheses testing indicate that there is significant relation between stock return and idiosyncratic volatility in the three models investigated under this study and the explanatory power of stock return by idiosyncratic volatility in Carhart four-factor model is higher compared to other two models.