Asset Pricing Model Conditional on Up and Down Market for Emerging Market: The Case of Pakistan

31 Pages Posted: 14 Sep 2014

See all articles by Nida Shah

Nida Shah

Isra University

Javaid Ali Dars

Mehran University Institute of Science, Technology and Development

Muhammad Haroon

Isra University

Date Written: September 1, 2014

Abstract

This study tests the validity of asset pricing model conditional on up and down market for emerging market of Pakistan. The results indicate that when emerging market undergoes negative market excess return, basic capital asset pricing model is inaccurate to predict stock returns. Although the conditional asset pricing model accurately predicts the risk-return trade off with beta as sole determinant of stock returns when there is up market, however yet it is significantly variant during down market where significant impact of residuals is evinced on stock returns. The market excess returns of up and down markets are also found asymmetric.

Keywords: Asset Pricing Model, Conditional, Pakistan, Emerging Market, Up Market, Down Market.

JEL Classification: C21, C22, G10, G12, G17

Suggested Citation

Shah, Nida and Dars, Javaid Ali and Haroon, Muhammad, Asset Pricing Model Conditional on Up and Down Market for Emerging Market: The Case of Pakistan (September 1, 2014). Available at SSRN: https://ssrn.com/abstract=2495827 or http://dx.doi.org/10.2139/ssrn.2495827

Nida Shah

Isra University ( email )

Hyderabad, Sindh
Pakistan

Javaid Ali Dars (Contact Author)

Mehran University Institute of Science, Technology and Development ( email )

Mehran University, Jamshoro, Sindh,
Jamshoro, Sindh
Pakistan
00923003358570 (Phone)

Muhammad Haroon

Isra University ( email )

Hyderabad, Sindh
Pakistan

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