Abstract
This study aims to test arbitrage pricing theory (APT) using monthly data from the non oil based companies in Iranian stock market that works on the sanctioned economy during 1991 to 2008. Tests were conducted using the principal component analysis, cross sectional regression and canonical correlation analysis. Overall, the findings document is a weak applicability of APT in this market. The evidences point to at least one factor but probably about two factors explained the cross-section of expected returns on Tehran Stock Exchange (TSE). Financial and economical sanctions have less effect on non oil industry in Iran. Key words: Sanctioned economy, non-oil based companies, arbitrage pricing theory.
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