MODELLING EMPIRICAL REGULARITIES FOR BANKING STOCKS IN PAKISTAN

Muhammad Ayub Siddiqui


DOI: http://dx.doi.org/10.22555/pbr.v19i4.1874

Abstract


This paper examines empirical regularities in terms of dayof-
the-week anomalies for the banking stocks at the Karachi Stock
Exchange for the period 1996 to 2008. Non normality of the data
with excess kurtosis suggested application of ARCH and GARCH
models which proved uncertainty of returns from banking stocks.
Nonparametric analysis of the data reveals evidence of day-of-theweek
effect in Pakistan as contrary to the findings of some of the
previous studies on Asia-Pacific markets. The evidence of the dayof-
the-week anomaly might be attributed to the strength of the
nonparametric estimation methods which are more robust when
the data does not meet assumptions of normal distribution. The
study also finds relatively higher risk associated with returns on
the last day of the working week in general. Negative skewness for
most of the return series indicates probability of yielding loss for
investors in the banking stocks. Volatility test proves asymmetric
results for various banking stocks. Results of the nonparametric
tests also reveal significantly different median returns on various
days of the week for these stocks. The study finds out relatively
greater risk associated with Faysal Bank, Jahangeer Siddiqui Bank,
Meezan Bank, National Bank and Prime Commercial Bank on
Mondays. For the days in the middle of the week the risks associated
with the banking stocks are not asymmetric. For Friday, the closing
day of the week, risk in respect of Bank of Punjab, Faysal Bank,
Muslim Commercial Bank and National Bank is significantly large.


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