M.A. Thesis:

The Effect of Accuracy and Time horizon Forecasted Earnings per share on Stock liquidity

Due to the growing importance of stock liquidity and it’s key role in the discovery of asset prices, distribution of financial risks, increasing the expected return and reduce the cost of transactions, cognition of factors affecting it, is vital. On the other hand, by providing information about earnings forecast, managers can affect market behavior. The main qualitative characteristics of forecasted information can be considered the accuracy and timeliness of those. So the present study examined the effect of accuracy and time horizon of forecasted earnings per share on the stock liquidity. In this study, the number of trading days, the relative volume of transactions, the monetary depth and the bid ask spread, has been used as liquidity variables. For this purpose, and to test the hypothesis, data from 143 companies of Tehran stock exchange, during the years 1388 to 1392, were examined by using linear regression, panel data and t-test. The main results of this study suggests the significant negative effect of earnings per share absolute forecast error on the relative volume of transactions and significant positive effect of it on the bid ask spread as well as significant positive effect of earnings per share forecast horizon on the stock trading days, furthermore earnings per share absolute forecast error had no significant effect on the stock trading days and the monetary depth also earnings per share forecast horizon had no significant effect on the relative volume of transactions the monetary depth and the bid ask spread.

Keywords: the number of trading days, the relative volume of transactions, the monetary depth and the bid ask