Investigating the relationship between earnings and stock prices in companies accepted in the stock exchange: A case study in Iran (2000-2010)

Abstract

The importance of investment for economic and social development is to the extent that paying attention to it causes to fall in a positive round leading to the economic growth and prosperity and its neglect can lead to the economic loss and falling into a descending trend and the negative round. The present study aims to investigate the relationship between earnings per share and earnings predicted for each share with stock price and the relationship between earnings per share and dividends per share and also the deviation of predicted earnings of share from actual earnings or prediction error. This study is a descriptive-survey type in which library method is used to collect the information related to the theoretical foundations of study and the existing data in Iran Stock Exchange is used to collect information for analyzing and testing the research hypotheses and, correlation and regression statistical methods and binomial test are used for analyzing and testing research hypotheses. The results of this study indicated that earnings per share and predicted earnings of per share had a positive relationship with stock price and there is a  relationship between earnings per share and dividends per share and  most of accepted companies in the Stock Exchange anticipate their own earnings per share more than the actual value.