Selectivity and Market-Timing Performance of Mutual Funds Using Human-Capital Augmented Various Asset-Pricing Models: Evidence from Pakistan

2022

JSSMS

Self Cite

Despite the strong growing popularity of Asset Pricing Models, it is difficult to estimate which factor contributes significantly in explaining average excess portfolio returns particularly in emerging equity market. Using an extensive sample over Jan-1994-Dec-2020 period, this paper aims to extend the literature by augmenting Tobin-Q adjusted risk premium with various unconditional standard asset pricing models which seeks to postulate the nexus between expected portfolios stock returns and risk-factors using monthly data of 521 enlisted financial and non-financial firms from Pakistan Stock Exchange. The multiple time-series OLS regression analysis models are employed to analyze Tobin-q risk-factor augmented with various factors models. Fama and French (2015) five-factor model excessively explains average equity returns however, our results reveal that size, value, profitability and particularly Tobin-q factor are significant while market and investment factor are redundant in Pakistan Stock Exchange. The momentum factor shows weak results in describing average equity returns in the market. Based on Gibbons, Ross and Shanken (1989) test, our findings support Tobin-Q augmented Fama and French (2015) five-factor model as appropriate for pricing stocks returns in emerging market of Pakistan. The investors, portfolio managers and policy-makers should assume the Tobin-q factor while constructing diversified portfolios for investments in Pakistan Stock Exchange

Section: Discussionmentioning

confidence: 99%

mentioning

confidence: 99%

An empirical investigation of Tobin’s-Q augmented various Asset Pricing Models: Evidence from Pakistan

2022

JSSMS

Self Cite

“…Before making a decision, potential investors are provided further information about the PSX investment patterns backed up by real-world data. The future potential studies in the similar discipline may be feasible if they investigate Covid-19 era as suggested by (Azam & Azeem, 2021); augmenting Human-Capital as additional factor with nested APMs as suggested by (Azam, 2022a); using GDP-Growth as macroeconomic additional mediating variable proposed by (Azam & Naveed, 2021); recently used Tobin-q as additional factor augmented with APMs advocated by (Azam, 2022b); using Leverage as added factor for further robustness of results as recommended by (Azam & Ilyas, 2011) in their studies. Moreover, employing developed and datasets from different nations, it is feasible to use macroeconomic variables and a variety of statistical and econometrical approaches for further robustness.…”

Section: Discussionmentioning

confidence: 99%

Unveiling the black swan of the Inflation-Adjusted Real Excess Returns-Risk Nexus: Evidence from Pakistan

Haddad

Naveed

et al. 2022

JSSMS

The risk-free rates are widely used as benchmark to measure excess stocks returns or excess market returns and contribute a significant role in Asset Pricing Models. The purpose of this study is to scrutinize the risk and real excess portfolio returns using inflation adjusted risk-free rates, a unique measuring technique with a primary focus on the momentum augmented Fama-French five-factor model, utilising monthly data for 1994-2022 from the Pakistan Stock Exchange. Using OLS regression technique, the findings reveal that except profitability, the market, size, value, momentum and investment move largely correlated with excess portfolio stocks returns. The Gibbons, Ross & Shanken test confirms that the momentum augmented Fama-French five-factor model outperforms in the market.

Tobin-Q, Liquidity and Momentum risk-premia: A Demonstration of Weighted Least Squares Regression Approach

2023

SJOM

Self Cite

Purpose- The basic purpose of the study is to examine whether Tobin-q, liquidity and momentum risk-premium contributes the explanatory power in terms of explaining portfolio returns in PSX. Design/Methodology- The Weighted Least Square (WLS) regression technique is empirically used to examine the nexus between risk-factor and portfolio returns using PSX dataset. The models provide useful tools for making efficient strategies in the jurisdiction of investments and portfolio constructions. Findings- The study reveals that multidimensional liquidity exhibits weak significant results while Tobin-q and momentum risk-factors demonstrate statistically significant determinants for PSX. Furthermore, WLS regression produces robust coefficient results than OLS regression as except liquidity all the factors exhibit substantially improved results. Practical Implications- The study findings would be useful for stocks and portfolio managers constructing optimal and diversified portfolios while investing in PSX.