A Multiscale Pricing Model with the Wavelet Analysis Approach, Fama-French Three-Factor Model, and Nonliquidity in Tehran Stock Exchange

Document Type: Original Article

Authors

1 Associate Prof, Faculty of Social Science & Economics, Alzahra University

2 Alzahra University

Abstract

The aim of this paper is to analyze the multiscale pricing model with the wavelet analysis approach, Fama-French three-factor model, and nonliquidity in Tehran Stock Exchange. It was also desirable to figure out how stock returns, Fama-French factors, and nonliquidity were related in different intervals. According to the results, various outcomes were obtained at different intervals. Stock returns had significant relationships with  (the ratio of book value to market value) and nonliquidity in the long term. Stock returns had significant relationships with the beta,  , and company size in the midterm, too. There was also a significant relationship between stock returns and the company size in the short term. The proposed methodology suggests that investors should employ dynamic portfolio management strategy and multiscale risk-return evaluation to seize investment opportunities.

Keywords