Studying Usefulness of Macro-Economic Variables in Predicting the Risk of Companies

Abstract

Nowadays, investors in capital markets require a detailed analysis of risk and return of companies listed in Iran stock exchange to be able to make proper investment decisions. Based on Fama and French three factors model, Book to Market value ratio was used as a replaced indicator of risk in this study.“Panel data” method was used for analyzing data during 2001 to 2008. The results showed that there werepositive weak relationships between Changes Ratio of Inflation Rate, Exchange Rate, Gold Rate and Oil price for each gallon and corporate risk indicator changes ratio while there was a negative weak relationship between changes ratio of Tehran Stock Exchange indicatorand corporate risk indicatorchanges ratio