Research Article 22
Journal of Finance & Economics Research - Volume 8, Issue 2 2023
By Mohammad Azam
10.20547/jfer2308202
Keywords: Asset Pricing Puzzles, Time-series Ordinary Least Square regression, Gibbons, Ross & Shanken (1989) test, Bombay Stock Exchange, Pakistan Stock Exchange.

This study spotlights the price fluctuations between risk-factors and portfolio returns which motivates the study to scrutinize multifactor asset pricing models in India and Pakistan equity markets during January 2003 to December 2022. The study sample included monthly data from 250 non-financial enrolled enterprises in each market. The data was evaluated using the time-series Ordinary Least Square regression estimate approach. We find that market-factor performs significant contribution independently though augmenting the liquidity-factor which resultantly enhances an insignificant and tenuous impact in Pakistan equity market while investment-factor shows insignificant contribution independently though augmenting the liquidity-factor which resultantly enhances the impact positively in Indian equity market. Moreover, the value-factor is not redundant for both the markets. However, based on absolute mean alpha test, the four-factor model for Indian equity market however, seven-factor model for Pakistani equity market outperform other asset pricing models.

Submission Date: 13 Feb, 2023 Reviews Completed: 30 Apr, 2023
Acceptance Date: 21 May, 2023 Publication Date: 27 May, 2023