IDEAS home Printed from https://ideas.repec.org/a/aho/journl/v15y2019i2p27-50.html
   My bibliography  Save this article

Quality minus junk factor: A study on asset pricing dynamics in the equity market of Pakistan

Author

Listed:
  • ShahrBano

    (International Islamic University-Pakistan)

  • Sumayya Chughtai

    (International Islamic University-Pakistan)

  • Tahira Awan

    (International Islamic University-Pakistan)

Abstract

This study examines the role of quality minus junk factor in explaining cross-sectional differences in stock returns for the equity market of Pakistan. A new factor quality minus junk has been added to the existing Fama & French three factor model (1993) as a fourth factor to check whether it is priced as a risk factor. The study also compares the explanatory power of the newly proposed model with the existing single-factor Capital Asset Pricing Model (CAPM) and Fama & French three factor model (1993). A high quality data set of 70 nonfinancial firms listed on the PSX is employed as a sample for the period 2008- 2016. Results show that quality minus junk factor is priced in the equity market of Pakistan and this newly proposed four factor model has significantly higher explanatory power than the existing three factor model.

Suggested Citation

  • ShahrBano & Sumayya Chughtai & Tahira Awan, 2020. "Quality minus junk factor: A study on asset pricing dynamics in the equity market of Pakistan," Business Review, School of Economics and Social Sciences, IBA Karachi, vol. 15(2), pages 27-50, July-Dece.
    • Handle: RePEc:aho:journl:v:15:y:2019:i:2:p:27-50
    as

    Download full text from publisher

    File URL: https://ir.iba.edu.pk/cgi/viewcontent.cgi?article=1059&context=businessreview
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aho:journl:v:15:y:2019:i:2:p:27-50. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: sshabbar (email available below). General contact details of provider: https://edirc.repec.org/data/ibakapk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.