The relationship between competitive or monopolistic market and stock returns (Case Study: Tehran Stock Exchange)

The central purpose of this thesis examines the relationship between market structure and stock returns in the active industry in the Tehran Stock Exchange. In other words, this research seeks to answer that the 13 industries in ISIC based on two-digit code in the Tehran Stock Exchange during the 2001 to 2007, What is have competitive or monopoly structure and what effect it has on stock returns. Monopoly and competitive market structure measured by the Four-firm concentration ratio and Herfindal-Hirschman index and Survey their effect on stock returns by using multiple regression analysis and panel data model with controlling systemic risk, size, ratio of book value to market value and immediate liquidity. The results indicate that two industry has the Monopoly structure and six industry has mild-Monopoly structure and five industry has competitive structure and the oil, coke and nuclear industry is the most competitive industries and plastic industry is the most Monopoly industries in Tehran Stock Exchange. Estimation results of models showed that there is a significant relationship between monopoly and competitive market structure with stock returns in the industry on the Tehran Stock Exchange. And this relationship is an inverse U that means when concentration increased to a peak and after this point in order to increase and reduce returns.