The neglected stock effect is the phenomenon where less researched stock earns more return than that predicted by the traditional CAPM. The aim of this study is to reveal the bonding between neglected stock premium and equity returns in the stock market of Pakistan by using Fama andFrench (1992 & 1993) methodology. This study is unique with respect to Pakistan that checks the relationship among neglected stock premium and equity returns on a sample of 200 stocks listed the largest stock market of Pakistan KSE. It is corroborated that neglected firm effect is present in market and priced by the market. This manifests that those stocks which are neglected, less researched and got less analyst coverage earn higher return in comparison to popular stocks that got more analyst coverage. The results also revealed that two factor model has greater explanatory power in comparison to Traditional CAPM. The results of this study are in line with the findings of Arbel and Strebel (1980) and Bertin, Michayluk and Prather (2008) for the USA equity market. Lower research analyst coverage increases the uncertainty for investor that how the company will perform in the future, which ultimately increase the risk factor and so the demand of return from the investors. The decision makers must consider this anomaly while making decisions regarding financing, investing etc. This study will facilitate the investors in taking effective investment decision and for efficient resource allocation.
In modern times of knowledge management, intellectual capital grasped considerable attention not only from academia and corporate sector but also from national policymakers. Major intellectual capital component of an economy is human capital which comprises talents, knowledge, skills etc. that nation has, which render economic value. Collective abilities i.e. education, health, training, talents, megastructures, physical assets etc. of a nation, aids in the growth and development of an economy. The scope of the study is to explore the long-term boning between performance and intellectual capital facet aka human capital (HC) in South Asian economies. Human capital index, which incorporates different facets of human capital is used to explore its link with the economic performance of the region. Panel ARDL approach evidenced long term bonding between variables of interest. Further analysis corroborates bi-directional causality amongst human capital and performance of the economy. Nations must spend considerable attention towards the development of human capital besides flourishing physical capital, so that economy can grow and embellish in sustainable terms.
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