Anomalous Behaviour and Volatility in Stock Returns are still Live - Efficient Markets Hypothesis? : Perspective from Pakistan Stock Exchange (PSX)

Abstract

Purpose: This empirical study investigates the anomalous behaviour and volatility in stock return of PSX-100 index of Pakistan Stock Exchange (PSX).
 Design/Methodology/Approach: The data is taken from January, 2006 to December, 2018 to detect variability and predictability of stock returns. ARCH and GARCH models are applied to check the volatility in stock returns using dummy variable.
 Findings: It is found that there exists positive and significant September effect in Pakistani equity market. The returns are high in the month of September than other months. The constant returns do not exist during the whole year so the efficient market hypothesis contradicts.
 Implications/Originality/Value: The Efficient Market Hypothesis is question mark due to volatility for mispricing the securities. The mispricing may have implications for undervalue or overvalue the securities and overall economic activity of equity – stock returns.

COVID-19 and Seasonality in Monthly Returns: a Firm Level Analysis of PSX

“…Also, a greater percentage of firms showed positive January and April in most sectors. Few sectors have also depicted the September effect detected by (Akash, Mahmood, & Ghafoor, 2020;Rafique & Shah, 2012), but indices provided a very different view of findings in this respect. A thorough firm-level analysis identified a positive July effect in various sectors, which explains the tax-loss selling hypothesis, while indices do not have a very consistent pattern of this monthly anomaly.…”