Momentum Effect in Stock Market: Empirical Evidence from Pakistan Stock
Exchange

Rasheed, Shahid; Umar, Saood; Alam, Waqas; Ullah, Muhammad Imran

doi:10.34091/ajss.12.1.02

Cited by 12 publications

(14 citation statements)

References 36 publications

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“…The results of four factors model of this study showed that the momentum factor could predict returns of the mutual fund industry. The results are consistent with the previous studies of Jagdesh and Titman (1993), Anjun, Ijaz and Ahmed (2016), Khan (2016) and Rasheed, Saood, Alam (2019). This study also shows consistent results with that of Detzel and Weigand (1998), Otten and Dennis (1999), Kothari andWarmer (2001), Wermers (2003), which suggested momentum factor explains the variation of the returns of the mutual funds whereas the results of this study negates the results of Yi and He (2016) that suggest that momentum factor does not capture the fund returns.…”

Section: Discussionsupporting

confidence: 93%

Performance Evaluation of Pakistan's Mutual Fund Industry: Validating Fama French 3 And 5 Factor Model

Iraj

Gul

Khan

2020

GRR

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In order to evaluate the performance of the mutual fund industry in various financial markets, a wide variety of researches have been conducted, which lead to different results. As the Pakistani mutual fund industry is much younger as compared to the US and UK fund industries and thus limited work has been done to evaluate the Pakistani mutual fund industry.Over the past few years, the industry has shown a phenomenal growth and it makes it worthwhile to study the performance of mutual funds. The aim of this research study is to validate the Fama French 3-Factor Model and Fama French 5-Factor Model. Also, this research attempts to test that which one of the included model performs better than the other so as to check their preferred suitability in measuring and evaluating the mutual fund performance in Pakistan. The monthly data of 323 open ended mutual funds for the period of 2008 to 2018 is analyzed. The GRS model validation test was applied, the results of the test found that the Fama French 5-Factor Model performed much better than the Fama French 3-Factor Model.This research contributes to the body of knowledge by providing academicians and practitioners more knowledge regarding multifactor asset pricing model so as to make better investment decisions.

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Section: Discussionsupporting

confidence: 93%

Performance Evaluation of Pakistan's Mutual Fund Industry: Validating Fama French 3 And 5 Factor Model

Iraj

Gul

Khan

2020

GRR

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“…The findings show that loss aversion and overconfidence are significant predictors of investment decisions and investment performance of equity investors. Parveen and Siddiqui (2018) clarify the mechanism by which disposition effect, anchoring and overconfidence influence the investment return. The results show that anchoring and disposition effect has a positive effect on investment return and overconfidence has a negative influence on the investment returns.…”

Section: Cognitive Heuristic-driven Biases Investment Decision-making...mentioning

confidence: 88%

The role of cognitive heuristic-driven biases in investment management activities and market efficiency: a research synthesis

Ahmad

2022

IJOEM

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PurposeThis article aims to systematically review the literature published in recognized journals focused on cognitive heuristic-driven biases and their effect on investment management activities and market efficiency. It also includes some of the research work on the origins and foundations of behavioral finance, and how this has grown substantially to become an established and particular subject of study in its own right. The study also aims to provide future direction to the researchers working in this field.Design/methodology/approachFor doing research synthesis, a systematic literature review (SLR) approach was applied considering research studies published within the time period, i.e. 1970–2021. This study attempted to accomplish a critical review of 176 studies out of 256 studies identified, which were published in reputable journals to synthesize the existing literature in the behavioral finance domain-related explicitly to cognitive heuristic-driven biases and their effect on investment management activities and market efficiency as well as on the origins and foundations of behavioral finance.FindingsThis review reveals that investors often use cognitive heuristics to reduce the risk of losses in uncertain situations, but that leads to errors in judgment; as a result, investors make irrational decisions, which may cause the market to overreact or underreact – in both situations, the market becomes inefficient. Overall, the literature demonstrates that there is currently no consensus on the usefulness of cognitive heuristics in the context of investment management activities and market efficiency. Therefore, a lack of consensus about this topic suggests that further studies may bring relevant contributions to the literature. Based on the gaps analysis, three major categories of gaps, namely theoretical and methodological gaps, and contextual gaps, are found, where research is needed.Practical implicationsThe skillful understanding and knowledge of the cognitive heuristic-driven biases will help the investors, financial institutions and policymakers to overcome the adverse effect of these behavioral biases in the stock market. This article provides a detailed explanation of cognitive heuristic-driven biases and their influence on investment management activities and market efficiency, which could be very useful for finance practitioners, such as an investor who plays at the stock exchange, a portfolio manager, a financial strategist/advisor in an investment firm, a financial planner, an investment banker, a trader/broker at the stock exchange or a financial analyst. But most importantly, the term also includes all those persons who manage corporate entities and are responsible for making their financial management strategies.Originality/valueCurrently, no recent study exists, which reviews and evaluates the empirical research on cognitive heuristic-driven biases displayed by investors. The current study is original in discussing the role of cognitive heuristic-driven biases in investment management activities and market efficiency as well as the history and foundations of behavioral finance by means of research synthesis. This paper is useful to researchers, academicians, policymakers and those working in the area of behavioral finance in understanding the role that cognitive heuristic plays in investment management activities and market efficiency.

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“…Anchoring is also considered the inability of investors to adopt new information that may divert their minds from the initial belief. Parveen and Siddiqui (2018) examined the impact of various behavioral biases in financial decision-making process of retail investors in Pakistan Stock Exchange. The researcher explored different biases that increase the irrationality in the market and compromise the perfect market hypothesis.…”

Section: Behavioral Biases and Financial Decisionsmentioning

confidence: 99%

“…Study found that cultural factors do not significantly influence decision-making process of investors. Parveen and Siddiqui (2018) examined impact of various behavioral biases in financial decision-making process of the retail investors in Pakistan Stock Exchange and explored different biases that increase irrationality in market and compromise perfect market hypothesis. A survey of Lee, Switzer, and Wang (2019) found very interesting results that investors usually prefer to invest in those stocks that belong to the local culture or are near to the indigenous cultural norms.…”

Section: Social and Cultural Factors With Investment Decision Makingmentioning

confidence: 99%

The Financial Decision Making of Retail Investors in Pakistan Stock Exchange: A Comprehensive Analysis of Key Factors

Khurshid

Ahmad

2023

JSRD

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In recent years, field of behavioral finance has gained increasing attention, with numerous studies investigating impact of various factors on investors' decision-making. However, there remains a critical gap in literature when it comes to a comprehensive understanding of the factors that influence retail investors' decision-making. This gap presents a chance for further research to explore factors that affect retail investors' decision-making, particularly in developing nations like Pakistan. The study examines both behavioral and external factors that impact the financial decision-making of retail investors in Pakistan. The research includes a sample of retail investors who invest in the Pakistan stock market, and data is collected using the simple random sampling technique. 1000+ questionnaire were distributed & 545 responses were received. The researcher used Smart-PLS for the purpose to analyze both measurement model and structural model. Results reveal that all exogenous variables have a significant influence financial decisions of retail investors in Pakistan stock market. Results hold significant implications & limitations for behavioral finance.

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Momentum Effect in Stock Market: Empirical Evidence from Pakistan Stock Exchange

Cited by 12 publications

References 36 publications

Performance Evaluation of Pakistan's Mutual Fund Industry: Validating Fama French 3 And 5 Factor Model

Performance Evaluation of Pakistan's Mutual Fund Industry: Validating Fama French 3 And 5 Factor Model

The role of cognitive heuristic-driven biases in investment management activities and market efficiency: a research synthesis

The Financial Decision Making of Retail Investors in Pakistan Stock Exchange: A Comprehensive Analysis of Key Factors

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