scholarly journals Value Investment Strategies and Asset Pricing: A Case of Pakistan Stock Exchange (PSX)

2021 ◽  
Vol 19 (1) ◽  
Keyword(s):  
Asset Pricing ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Wald Test ◽  
Linear Perspective ◽  
Investment Strategies ◽  
Method Of Moment ◽  
Financial Analyst ◽  
Value Effect ◽  
Financial Firm

The Capital Asset Pricing Model (CAPM) measures only a linear relationship between the Risk and the Return. However, market dynamics and anomalies calls for understanding the relationship in between risk and return from non-linear perspective. Thus, current study explores an opportunity to study asset value anomalies by Constructing Decile Portfolio for the period starting from 2001 to 2018 with 900 firms listed. GMM (Generalized method of moment and Wald test are applied to see the robustness of results. For further analysis, Risk Adjusted CAPM, Fama French 3 Factor (FF3) and 5 Factor (FF5) are applied. Empirical results indicate that value effect and debt to equity ratio are essential factors and genuinely explain what CAPM fails to explain. The findings from the study recommend that investing in High value and high leverage firm will generate abnormal returns to investors. Taking long position in high value firm and short position in low value firms and same with debt to equity anomaly. The results will help financial analyst develop investment strategies for well diversified and efficient portfolios. These results can also be helpful to financial firm and security analyst in the financial market where they can take appropriate capital budget decisions while investing.

scholarly journals Contrarian and Momentum Investment Strategies in Pakistan Stock Exchange

2018 ◽  
Vol 57 (3) ◽  
pp. 253-282
Author(s):  
Jalal Shah ◽  
Attaullah Shah
Keyword(s):  
Stock Exchange ◽  
Abnormal Returns ◽  
Relative Strength ◽  
Investment Strategies ◽  
Momentum Strategies ◽  
Cross Sectional ◽  
Momentum Profits ◽  
Cumulative Abnormal Returns ◽  
Lag Effect ◽  
Penny Stocks

This study examines several aspects of the momentum strategies, such as profitability, risk-based explanation, and decomposition of the momentum profits. For this purpose, we use weekly and monthly data of 581 firms listed at the Pakistan Stock Exchange (PSX) for the period 2004-2014. We found the presence of momentum profits over short and long-horizons, while majority of the contrarian profits were observed only in the presence of penny stocks that have share prices of PKR 10 or less. As a robustness check, we computed returns through the weighted relative strength scheme (WRSS) procedure and average cumulative abnormal returns (ACARs). Interestingly, the results reported through WRSS have shown a similar pattern to that obtained through average cumulative abnormal returns (ACARs). Further, to know which factor contributes more to momentum and contrarian profits, we used the model proposed by Lo and MacKinlay (1990). Our findings show that the overreaction effect is the largest contributing factor of contrarian profits in PSX, while cross-sectional risk is the second largest factor and negatively affects the contrarian profits. Moreover, the lead-lag effect contributes positively to the contrarian profits. Similarly, the largest contributing factor for momentum profits is the underreaction effect, whereas cross-sectional risk is the second largest factor that positively affects momentum profits. Unlike contrarian profits, lead-lag effect reduces the momentum profits in the PSX.

Low-risk investment strategy: sector bets or stock bets?

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shilpa Peswani ◽  
Mayank Joshipura
Keyword(s):  
Asset Pricing ◽  
High Risk ◽  
Investment Strategy ◽  
Low Risk ◽  
Investment Strategies ◽  
Stock Level ◽  
Content Type ◽  
Risk Effect ◽  
Value Effect ◽  
Risk Investment

PurposeThe portfolio of low-risk stocks outperforms the portfolio of high-risk stocks and market portfolios on a risk-adjusted basis. This phenomenon is called the low-risk effect. There are several economic and behavioral explanations for the existence and persistence of such an effect. However, it is still unclear whether specific sector orientation drives the low-risk effect. The study seeks to answer the following important questions in Indian equity markets: (a) Whether sector bets or stock bets mainly drive the low-risk effect? (b) Is it a mere proxy for the well-known value effect? (c) Does the low-risk effect prevail in long-only portfolios?Design/methodology/approachThe study is based on all the listed stocks on the National Stock Exchange (NSE) of India from December 1994 to September 2018. It classifies them into 11 Global Industry Classification Standard (GICS) sectors to construct stock-level and sector-level BAB (Betting Against Beta) and long-only low-risk portfolios. It follows the study of Asness et al. (2014) to construct various BAB portfolios. It applies Fama–French (FF) three-factor and Fama–French–Carhart (FFC) four-factor asset pricing models in addition to Capital Asset Pricing Model (CAPM) to examine the strength of BAB, sector-level BAB, stock-level BAB and long-only low-beta portfolios.FindingsBoth sector- and stock-level bets contribute to the return of the low-risk investing strategy, but the stock-level effect is dominant. Only betting on safe sectors or industries will not earn economically significant alpha. The low-risk effect is unique and not a value effect in disguise. Both long-short and long-only portfolios within sectors and industry groups deliver positive excess returns. Consumer staples, financial, materials and healthcare sectors mainly contribute to the returns of the low-risk effect in India. This study offers empirical evidence against the Samuelson (1998) micro-efficient market given the strong performance of the stock-level low-risk effect.Practical implicationsThe superior performance of the low-risk investment strategies at both stock and sector levels offers investors an opportunity to strategically invest in stocks from the right sectors and earn high risk-adjusted returns with lower drawdowns over an entire market cycle. Besides, it paves the way for stock exchanges and index manufacturers to launch sector-specific low-volatility indices for relevant sectors. Passive funds can launch index funds and exchange-traded funds by tracking these indices. Active fund managers can espouse sector-specific low-risk investment strategies based on the results of this and similar other studies.Originality/valueThe study is the first of its kind. It offers insights into the portfolio characteristics and performance of the long-short and the long-only variant of low-risk portfolios within sectors and industry groups. It decomposes the low-risk effect into sector-level and stock-level effects.

scholarly journals Australian Stock Exchange and sub-variants of price momentum strategies

2018 ◽  
Vol 15 (1) ◽  
pp. 224-235
Author(s):  
Abdullah Ejaz ◽  
Petr Polak
Keyword(s):  
Trading Volume ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Investment Strategies ◽  
Momentum Effect ◽  
Short Term ◽  
Momentum Strategies ◽  
Price Momentum ◽  
Return Behavior

The aim of this study is to examine the sub-variants of price momentum strategies. The paper recommends which sub-variants post above average returns for Australian Stock Exchange. It also analyzes the return behavior of short-term momentum effect among sub-variants of price momentum strategies. It has been found that monthly price momentum strategies result in above average abnormal returns, whereas weekly price momentum strategies should be used in combination with monthly price momentum strategies. Trading volume-based momentum investment strategies should not be used at all.

scholarly journals Political elections, abnormal returns and stock price volatility: the case of Greece

2016 ◽  
Vol 13 (1) ◽  
pp. 161-169 ◽  
Author(s):  
Athanasios Koulakiotis ◽  
Harry Papapanagos ◽  
Nicholas Papasyriopoulos
Keyword(s):  
Stock Price ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Price Volatility ◽  
Investment Strategies ◽  
Study Methodology ◽  
Athens Stock Exchange ◽  
The Impact ◽  
Of Greece ◽  
Event Study Methodology

The impact of the Greek political elections on the return and volatility of the Athens Stock Exchange (ASE) is investigated using both the standard event study methodology and various univariate GARCH models. The empirical results reveal positive pre- and post-election abnormal returns, but negative on the day of the election. Strong evidence is also found that suggests that the election outcome significantly affects the ASE return; however, the evidence is rather limited for the ASE volatility. The empirical findings raise doubts about the efficiency of the Greek stock market and might have important implications for investors with respect to decisions regarding entering and/or exiting the market or investment strategies around time periods where political elections are going to take place

Asymmetric price responses to stock addition to and deletion from the Athens Stock Exchange Index

2018 ◽  
Vol 44 (4) ◽  
pp. 406-423
Author(s):  
George Papachristou ◽  
Stephanos Papadamou ◽  
Eleftherios Spyromitros
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Policy Implications ◽  
Stock Index ◽  
Market Model ◽  
Investment Strategies ◽  
Content Type ◽  
Time Period ◽  
Negative Effect

Purpose The purpose of this paper is to investigate the response of investors to the announcements on the inclusion and exclusion of companies from the FTSE-ASE 20 index. Design/methodology/approach Data on the inclusion and exclusion of companies from the FTSE-ASE 20 index in the period 2000-2012 were used. The authors performed an event study analysis using a constant return model and a market model. Two different measures of aggregated abnormal returns, namely the cumulating abnormal returns and the buy-and-hold abnormal return, were used in this investigation. Findings The results suggest that the exclusion of a company from the index has a significant negative effect on stock returns. Specifically, such a stock takes more than 15 days to recover. However, for a company’s inclusion in the index, the authors observe short-lived positive reactions on stock returns. Practical implications Capital market regulators and investors should find the policy implications of this paper meaningful. Investment strategies can be implemented on the basis of the news of exclusion from the index, which can lead to higher performance for investors. As far as authorities are concerned, the decision of inclusion and exclusion to the most significant stock index in the Greek market should be carefully considered because it creates financial instability for a significant time period. Originality/value By using a battery of parametric and non-parametric econometric tests, the existence of abnormal returns of the FTSE-ASE 20 index is explored over a long time period, including the recent financial crisis.

Liquidity Risk And Asset Pricing :, Evidence From Amman Stock Exchange

2017 ◽  
pp. 129
Author(s):  
محمد أحمد بني هاني ◽  
منى ممدوح المولا
Keyword(s):  
Asset Pricing ◽  
Stock Exchange ◽  
Liquidity Risk ◽  
Amman Stock Exchange

scholarly journals Price adjustments on the Johannesburg Stock Exchange for unexpected and dramatic news events: An empirical analysis

1989 ◽  
Vol 20 (3) ◽  
pp. 119-128 ◽  
Author(s):  
N. Bhana
Keyword(s):  
Empirical Analysis ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Short Term ◽  
Johannesburg Stock Exchange ◽  
Price Adjustments ◽  
Weak Evidence ◽  
News Events ◽  
One Year

The objective of this study is to determine whether companies listed on the Johannesburg Stock Exchange overreacted to unexpected favourable and unfavourable company-specific news events during the period 1970 - 1984. The JSE appears to be inefficient in reacting to the announcement of unfavourable news; economically significant abnormal returns up to one year following the event are observed. The JSE does not appear to overreact to news of a favourable nature, there is only weak evidence of short-term overreaction. The selling pressure caused by panic selling could depress prices well below levels justified by the unfavourable news. The magnitude of the overreaction to unfavourable news is sufficient to enable astute investors to outperform the market by taking positions in these securities. Knowledge of the pattern of market overreaction can also be of value to investors for transactions that are to take place anyway.

Stock Market Reaction on Green-Bond Issue: Evidence from Indian Green-Bond Issuers

2021 ◽  
pp. 097226292110225
Author(s):  
Rakesh Kumar Verma ◽  
Rohit Bansal
Keyword(s):  
Stock Returns ◽  
Financial Institutions ◽  
Stock Price ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Developed Countries ◽  
Low Carbon ◽  
Bond Issue ◽  
The Government ◽  
The Impact

Purpose: A green bond is a financial instrument issued by governments, financial institutions and corporations to fund green projects, such as those involving renewable energy, green buildings, low carbon transport, etc. This study analyses the effect of green-bond issue announcement on the issuer’s stock price movement. It shows the reaction of the stock price after the issue of green bonds. Methodology: This study is based on secondary data. Green-bond issue dates have been collected from newspaper articles from different online sources, such as Business Standard, The Economic Times, Moneycontrol, etc. The closing prices of stocks have been taken from the NSE (National Stock Exchange of India Limited) website. An event window of 21 days has been fixed for the study, including the 10 days before and after the issue date. Data analysis is carried out through the event study method using the R software. Calculation of abnormal returns is done using three models: mean-adjusted returns model, market-adjusted returns model and risk-adjusted returns model. Findings: The results show that the issue of green bonds has a significant positive effect on the stock price. Returns increase after the green-bond issue announcement. Although the announcement day shows a negative return for all the samples taken for the study, the 10-day cumulative abnormal return (CAR) is positive. Thus, green-bond issues lead to positive sentiments among investors. Research implications: This research article will help the government issue more green bonds so that the proceeds can be utilized for green projects. The government should motivate corporations and financial institutions to issue more green bonds to help the economy grow. In India, very few organizations have issued a green bond. It will be beneficial if these players issue green bonds, as it will increase the firms’ value and boost returns to the investors. Originality/value: The effect of green-bond issue on stock returns has been analysed in some studies in developed countries. This is the first study to examine the impact of green-bond issue on stock returns in the Indian context, to the best of our knowledge.

Studying the Effect of Changing the Managing Director on the Abnormal Returns of Shares of Companies Listed on the Iraqi Stock Exchange

2021 ◽  
Vol 39 (11) ◽  
Author(s):  
Hussein Hasan ◽  
Hudaa Nadhim Khalbas ◽  
Farqad Mohammed Bakr AL Saadi
Keyword(s):  
Stock Returns ◽  
Significant Relationship ◽  
Stock Prices ◽  
Market Reaction ◽  
Stock Exchange ◽  
Hypothesis Test ◽  
Abnormal Returns ◽  
The Other ◽  
Other Hand ◽  
Abnormal Stock Returns

The aim of this research is to study the market reaction to the change of the managing director and how this change affects the abnormal returns of the shares. The research is based on the information published by the companies listed on the Iraq Stock Exchange, and 35 companies were selected for the period from 2015 to 2019. The results of the hypothesis test for this study show that there is a negative and significant relationship between the change of the managing director and abnormal stock returns. On the other hand, investors undervalue stock prices when changing CEOs. As a result, the stock returns are less than expected.

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