Tobin-Q, Liquidity and Momentum risk-premia: A Demonstration of Weighted Least Squares Regression Approach
Purpose- The basic purpose of the study is to examine whether Tobin-q, liquidity and momentum risk-premium contributes the explanatory power in terms of explaining portfolio returns in PSX. Design/Methodology- The Weighted Least Square (WLS) regression technique is empirically used to examine the...
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| Format: | Article |
| Language: | English |
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seisense
2023-08-01
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| Series: | SEISENSE Journal of Management |
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| Online Access: | https://journal.seisense.com/jom/article/view/897 |
| Summary: | Purpose- The basic purpose of the study is to examine whether Tobin-q, liquidity and momentum risk-premium contributes the explanatory power in terms of explaining portfolio returns in PSX.
Design/Methodology- The Weighted Least Square (WLS) regression technique is empirically used to examine the nexus between risk-factor and portfolio returns using PSX dataset. The models provide useful tools for making efficient strategies in the jurisdiction of investments and portfolio constructions.
Findings- The study reveals that multidimensional liquidity exhibits weak significant results while Tobin-q and momentum risk-factors demonstrate statistically significant determinants for PSX. Furthermore, WLS regression produces robust coefficient results than OLS regression as except liquidity all the factors exhibit substantially improved results.
Practical Implications- The study findings would be useful for stocks and portfolio managers constructing optimal and diversified portfolios while investing in PSX.
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| ISSN: | 2617-5770 |