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A Multifactor Model of Banking Industry Stock Returns: An Emerging Market Perspective

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  • Saqib Muneer
  • Babar Zaheer Butt
  • Kashif Ur Rehman

Abstract

The purpose of this study is to examine the stock returns variation to specific macroeconomic and industry variables by applying multi-factor model. The firms of banking industry were selected for this study on the basis of data availability, profitability and performance on the Karachi Stock Exchange. The data for the selected firms and economic variables obtained for the period of 10 years. Descriptive statistics performed for the temporal properties and GARCH model was used to analyze the risk and return relationship. The tests were applied on the stock returns of each firm and on the data set of the entire industry to generalize the results. The results reveal that market return is largely accounts variation in stock returns, however the inclusion of other economic variables has added to the explanatory power of the model. It is also found that industry stock returns are more responsive to changes in economic conditions than firm level stock returns.

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  • Saqib Muneer & Babar Zaheer Butt & Kashif Ur Rehman, 2011. "A Multifactor Model of Banking Industry Stock Returns: An Emerging Market Perspective," Information Management and Business Review, AMH International, vol. 2(6), pages 267-275.
    • Handle: RePEc:rnd:arimbr:v:2:y:2011:i:6:p:267-275
    DOI: 10.22610/imbr.v2i6.907
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    2. Suresh Ramakrishnan & Saqib Muneer & Melati Ahmad Anuar, 2015. "An Interaction between Firm Strategy, Capital Structure and Firm’s Performance," Journal of Economics and Behavioral Studies, AMH International, vol. 7(4), pages 37-47.
    3. Azasakhe Nkcubeko Nomsobo & Roscoe Bertrum van Wyk, 2018. "The Impact of Short- Term Interest Rates on Bank Funding Costs," Journal of Economics and Behavioral Studies, AMH International, vol. 10(3), pages 141-148.
    4. Nadeem Nazir & Hamad Raza, 2017. "Testing Microstructure Theory on Karachi Stock Exchange," Information Management and Business Review, AMH International, vol. 9(2), pages 16-24.
    5. Athenia Bongani Sibindi, 2018. "The Determinants of South African Banks' Capital Buffers," Journal of Economics and Behavioral Studies, AMH International, vol. 10(1), pages 234-244.

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