Size and Value Premium in Karachi Stock Exchange
Lahore School of Economics - Centre for Research in Economics and Business
The current study evaluates the performance of Fama and French Three Factor model in Karachi Stock Exchange. We employed multivariate regression approach after sorting six portfolios on size and book to market. The constituent stocks were selected to represent each and every sector of KSE. Daily returns were employed for a period of five years starting from January 2003 to December 2007. The six month Pakistan's T Bill yield was used as proxy for risk free rate to determine excess returns. The excess returns for each portfolio were regressed on market, size and value factors. The results were encouraging for the three factor model. The three factor model was able to explain the variations in returns for most of the portfolios and the results remain consistent when the sample was reduced to control for size effect. Our findings are consistent with most of the studies that suggested the validity of three factor model in emerging markets.
Number of Pages in PDF File: 40
Keywords: Size and Value Premium, CAPM, Asset Pricing. Emerging Stock Markets, Karachi Stock Exchangeworking papers series
Date posted: April 23, 2008
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