The Impact of Company Financial Characteristics on Unsystematic Risk Using the Fama-French Three-Factor Approach and Combining the GARCH and EGARCH Models of the Fama-Macbeth Regression
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

The Impact of Company Financial Characteristics on Unsystematic Risk Using the Fama-French Three-Factor Approach and Combining the GARCH and EGARCH Models of the Fama-Macbeth Regression

Document Type : Original Article

Authors
kaveh parandin 1
javad doust jabarian 2
mohammad portalebi 3
mohsen Alikhani 4
1 Department of Accounting, Payame Noor University, Tehran, Iran
2 PhD ,, Department of Accounting, Allameh Tabatabaei University, Tehran, Iran
3 PhD , Department of Financial, Tehran University, Tehran, Iran
4 PhD , Department of Accounting, Allameh Tabatabaei University, Tehran, Iran
10.22034/jse.2023.11923.1949
Abstract
The main purpose of this study is to measure the impact of non-systematic risk on the financial characteristics of the company during a 14-year period from 2006 to 1398 with 1904 observations in 136 companies listed on the Tehran Stock Exchange. In this paper, firstly we estimate firm - specific (unsystematic) risk through using Fama & French three factor model and also with incorporating of GARCH and EGARCH models. Next, we expand Fama - MacBeth regression to analyze how firm characteristics such as return, book value, financial leverage, size , Earnings per share (EPS) and share turnover could discriminate firms in terms of idiosyncratic risk. By using Tehran stock Exchange (TSE) which includes a sample of 136 listed companies, we came into this conclusion that different firm financial characteristics have impact on idiosyncratic risk. Firm size, return and EPS have negative relation with idiosyncratic risk. In contrast, our findings show that share turnover and financial leverage could increase the idiosyncratic risk level.
Keywords
diosyncratic risk
firm financial characteristics
GARCH model
Fama-MacBeth model
Subjects
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Quarterly Journal of Securities Exchange
Volume 18, Issue 71
Autumn 2025
Pages 273-308