I=
Pakistan Research Repository Home
 

Title of Thesis

Economic Forces And Stock Market Returns: A Cross Sectoral Study Testing Multifactor Model

Author(s)

Babar Zaheer Butt

Institute/University/Department Details
FUIEMS Foundation University, Islamabad
Session
2010
Subject
Management Sciences
Number of Pages
240
Keywords (Extracted from title, table of contents and abstract of thesis)
Sectors, Macroeconomic, Returns, Variation, Ascertain, Sectoral, Testing, Multifactor, Forces, Economic, Stock, Banking, Multi, Legislators

Abstract
Stock market performance is generally considered to be the reflector of financial and economic conditions of a country. There are number of macroeconomic and industry related factors that potentially can affect the stock returns of the companies. The primary purpose of this study is to examine the stock returns variation to specific macroeconomic and industry variables by applying multi-factor model. The model consists of macroeconomic and industry variables including market return, consumer price index, risk free rate of return, exchange rate, money supply and industrial production. The study attempts to determine which, if any, of the macroeconomic and industry variables are of use in explaining the variability of stock returns of Pakistani Industries. The firms relating to 09 different sectors are selected for this study on the basis of data availability, profitability and performance on the Karachi Stock Exchange 100 index. These sectors are Banking, Cement, Fertilizer, Automobile, Ghee, Pharmaceutical, Petroleum, Tobacco and Textile. The stock prices data for the selected firms and economic variables obtained for the maximum period of 10 years. Descriptive statistics performed for the temporal properties of the data and Augmented Dickey Fuller (ADF) test applied to find out the data stationarity. GARCH model used to analyze the risk and returns relationship.The tests applied on the stock returns of each firm of the industry and on the data set of the entire industry as well to generalize the results. An attempt was therefore made to ascertain whether a multi index model was better than a single index model in explaining the variation in stock returns of Pakistani Industries. The results reveal that market return is mainly responsible for the stock returns variation, however the inclusion of other macroeconomic and industry related variables has added additional explanatory power in describing the stock returns variation. It is evident from results that stock returns volatility depicts time varying characteristics across the industries and there is some statistical relationship between risk and return. It is found that industry stock returns are more responsive to changes in economic conditions than firm level stock returns. Results also indicate that stock returns of different industries behave differently in similar economic conditions that acquaint investors about the risk diversification opportunity in thestock market. The contribution of economic variables towards stock returns can help researchers/practitioners/investors to understand the risk return relationship and pricing of economic risk and for the legislators to undertake certain measures for the improvement of economic conditions and hence stability and growth of the stock market and economy.

Download Full Thesis
1,130 KB
S. No. Chapter Title of the Chapters Page Size (KB)
1 0 CONTENTS
 

 

viii
14 KB
2 1 INTRODUCTION

1.1 Background of the Study
1.2 Problem Identification
1.3 Problem Statement
1.4 Objective of the Study
1.5 Rationale of the Study

1
55 KB
3 2 INDUSTRIAL SECTOR GROWTH AND CAPITAL MARKET PERFORMANCE

2.1 Industrial Sector Performance in Pakistan
2.2 Overview of the Pakistani Capital Market

12
32 KB
4 3 LITERATURE REVIEW

3.1 Theoretical Literature
3.2 Review of Empirical Literature
3.3 Theoretical Framework
3.4 Analytical Framework

18
130 KB
5 4 RESEARCH METHODOLOGY

4.1 Data
4.2 Procedure
4.3 Statistical Tests

44
33 KB
6 5 DESCRIPTIVE STATISTICS AND TEST FOR UNIT ROOT

5.1 Descriptive Statistics
5.2 Tests for Unit Root

51
93 KB
7 6 RESULTS AND DISCUSSION

6.1 Results of GARCH Model
6.2 Discussion

72
633 KB
8 7 CONCLUSION AND RECOMMENDATIONS

7.1 Conclusion
7.2 Recommendations and Future Implications
7.3 Limitations of the Study

202
46 KB
9 8 REFERENCES AND APPENDIX 212
66 KB