University of Isfahan Journal of Asset Management and Financing 2383-1189 4 3 2016 09 22 The Relation of Risk-Adjusted Excess Return with Liquidity and Liquidity Risk (Companies Listed in Tehran Stock Exchange) The Relation of Risk-Adjusted Excess Return with Liquidity and Liquidity Risk (Companies Listed in Tehran Stock Exchange) 77 90 20648 10.22108/amf.2016.20648 FA Ahmad Ahmadpour University of Mazandaran Fereshte Marvi University of Mazandaran Journal Article 2016 11 21 Risk aversion and return orientation are two important principles in every investment decision, and risk averse investors avoid investing in risky opportunities without receiving their expected return. In other words, given that most of the investment opportunities impose some level of high or low risk, investors expect premium reward depending on the level of risk they take. In this paper, we investigate the relation between liquidity and liquidity risk as two proxies of investment risk and risk-adjusted excess return. Our sample includes 40 companies listed in the Tehran Stock Exchange for the period of 2006-2012. We use multivariate regression and supplementing tests for data analysis and testing the hypothesis about the relation between risk and excess return. The results show that excess return has a significantly negative relation with stock liquidity. However, no significant relation is recognized between excess return and market liquidity, stock liquidity risk and market liquidity. Risk aversion and return orientation are two important principles in every investment decision, and risk averse investors avoid investing in risky opportunities without receiving their expected return. In other words, given that most of the investment opportunities impose some level of high or low risk, investors expect premium reward depending on the level of risk they take. In this paper, we investigate the relation between liquidity and liquidity risk as two proxies of investment risk and risk-adjusted excess return. Our sample includes 40 companies listed in the Tehran Stock Exchange for the period of 2006-2012. We use multivariate regression and supplementing tests for data analysis and testing the hypothesis about the relation between risk and excess return. The results show that excess return has a significantly negative relation with stock liquidity. However, no significant relation is recognized between excess return and market liquidity, stock liquidity risk and market liquidity. https://amf.ui.ac.ir/article_20648_6f3f2b11ad43b8eede00666905016dc8.pdf