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1 – 3 of 3This study aims to examine investors’ herd behaviour for various calendar events and size-based stock portfolios in Pakistan. The authors consider three calendar effects, crisis…
Abstract
Purpose
This study aims to examine investors’ herd behaviour for various calendar events and size-based stock portfolios in Pakistan. The authors consider three calendar effects, crisis (COVID-19 and financial crisis 2018–19), announcement of political news and popular calendar anomalies (month-of-the-year and day-of-the-week), and investigate the impact of stock size on calendar effect in terms of investors’ herd behaviour.
Design/methodology/approach
The study uses non-linear specification to capture herd behaviour using firm-level daily data for 496 stocks listed on Pakistan Stock Exchange over the period 2001–2020.
Findings
The results indicate herd formation during periods of COVID-19, financial crisis, political news announcements and January (month-of-the-year). The authors also observe significant herding for the biggest and smallest size stocks over complete period. However, the authors find more pronounced herding in big stocks during January as compared to the more noticeable herding in small stocks over complete period. The findings suggest that herding in small stocks is not the main cause of January herding and hint on the prevalence of significant institutional herding during January.
Practical implications
The stock prices destabilize because of the mimicking behaviour during crisis periods, days of political announcements and month of January. Implementation of insider trading laws and transparent information environment can help in reducing these effects and increasing market efficiency.
Originality/value
The authors consider the recent COVID period in our analysis. In addition, we provide new evidence on the possible impact of stock size on calendar effect in terms of herd behaviour, which, to the best of the authors’ knowledge, has not yet been documented in literature.
Details
Keywords
Madeeha Omer Lakhani, Sana Tauseef and Wajid Ali Chattha
This research aims to investigate the feasibility of formalizing an old, informal livestock financing practice in Pakistan known as Adhyara through assessment of estimated return…
Abstract
Purpose
This research aims to investigate the feasibility of formalizing an old, informal livestock financing practice in Pakistan known as Adhyara through assessment of estimated return and risk.
Design/methodology/approach
The hedonic pricing model was employed to estimate the impact of breed, weight, pregnancy status and milk yield on cattle sales price, and appropriate estimates were used for monetization. The stochastic simulation was then used to estimate the distribution of capital returns for investors in the informal livestock practice. Primary data on animal prices and attributes were obtained from a survey of dairy farms and data on terms of Adhyara deal were obtained from a survey of nomad pastoralists and current investors. In-depth interviews were also conducted with different stakeholders to get insights into this informal livestock practice and social elements.
Findings
Results from the hedonic model show that the animal prices in Pakistan are highly variable depending on the animal attributes of breed, weight, milk yield and pregnancy status with an average value of PKR (Pakistani Rupee) 191,771 and standard deviation of PKR 66,762. Our stochastic simulation reveals mean estimated real return of 24 per cent. This return is competitive considering local and international investment alternatives.
Social implications
The research identifies a lucrative and market competitive investment option and thus opens the window of opportunity to introduce grass root entrepreneurship in the livestock sector. Recommended formalization of this traditional livestock practice can boost investment creating substantial potential for the uplift of local communities and simultaneously contribute towards the goals of poverty eradication, food provision and employment generation for women.
Originality/value
This research lays out the possibility of formalizing the practice of a traditional livestock financing in an agricultural country.
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Keywords
Sana Tauseef and Philippe Dupuy
This paper aims to expand foreign investors' understanding of potential return enhancement and risk diversification advantages offered by equity market of Pakistan through…
Abstract
Purpose
This paper aims to expand foreign investors' understanding of potential return enhancement and risk diversification advantages offered by equity market of Pakistan through comparing its performance to performances in other markets and investigating what matters for investing in Pakistan's market.
Design/methodology/approach
Comparative analysis of Pakistan Stock Exchange is performed using data for 22 developed and 22 emerging markets over the period 1993–2019. Cross-sectional analysis is performed using data for 130 non-financial firms from Pakistan and Carhart (1997) and Fama and French (2015) models are applied. The role of liquidity with five-factor model is analyzed using turnover rate and Amihud (2002) illiquidity cost as liquidity measures.
Findings
Pakistan's equity offers substantial diversification benefits if added to developed market portfolios. However, observed large returns come together with inverted premia for most traditional factors indicating that investors may want to invest preferably in big stocks with low book-to-market and momentum. Finally, global investors can invest in high yielding stocks with low liquidity risk owing to positive connection between liquidity and returns.
Practical implications
This study will provide investment model for foreign investors to enhance their portfolio returns. Policy makers in Pakistan must identify regulatory steps to facilitate foreign investments.
Originality/value
To the best of the authors' knowledge, this is the first study which identifies efficiency gains offered by Pakistan's equity for global investors.