The reversal strategy: A test case for an emerging market
The reversal strategy in the Pakistan Stock Market has shown significant profits for the time period January 1993 - September 2017. The available asset pricing models are unable to link these returns with the risk premium. This paper explores an alternative channel of predicting risk premium. It sug...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Institute of Business Administration
2019-06-01
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| Series: | Business Review |
| Subjects: | |
| Online Access: | https://ir.iba.edu.pk/businessreview/vol14/iss1/2/ |
| _version_ | 1797382729293103104 |
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| author | Hilal Anwar Butt Mohsin Sadaqat |
| author_facet | Hilal Anwar Butt Mohsin Sadaqat |
| author_sort | Hilal Anwar Butt |
| collection | DOAJ |
| description | The reversal strategy in the Pakistan Stock Market has shown significant profits for the time period January 1993 - September 2017. The available asset pricing models are unable to link these returns with the risk premium. This paper explores an alternative channel of predicting risk premium. It suggests that reversal profits can be considered as compensation for providing liquidity to the market during times of high volatility. Results reveal that reversal is stronger for illiquid and volatile stocks. Furthermore, firms that show reversal, are cash constrained, have lower return on asset (ROA) and equity (ROE), lesser operating profitability (OP), investment (INV) and net income (NI). |
| first_indexed | 2024-03-08T21:10:42Z |
| format | Article |
| id | doaj.art-b6a931e3ca264cb28cd0aef738a8fb0b |
| institution | Directory Open Access Journal |
| issn | 1990-6587 2788-9599 |
| language | English |
| last_indexed | 2024-03-08T21:10:42Z |
| publishDate | 2019-06-01 |
| publisher | Institute of Business Administration |
| record_format | Article |
| series | Business Review |
| spelling | doaj.art-b6a931e3ca264cb28cd0aef738a8fb0b2023-12-22T07:04:42ZengInstitute of Business AdministrationBusiness Review1990-65872788-95992019-06-011411227https://doi.org/10.54784/1990-6587.1022The reversal strategy: A test case for an emerging marketHilal Anwar Butt0Mohsin Sadaqat1Institute of Business Administration, Karachi, PakistanNational University of Sciences and Technology, Islamabad, PakistanThe reversal strategy in the Pakistan Stock Market has shown significant profits for the time period January 1993 - September 2017. The available asset pricing models are unable to link these returns with the risk premium. This paper explores an alternative channel of predicting risk premium. It suggests that reversal profits can be considered as compensation for providing liquidity to the market during times of high volatility. Results reveal that reversal is stronger for illiquid and volatile stocks. Furthermore, firms that show reversal, are cash constrained, have lower return on asset (ROA) and equity (ROE), lesser operating profitability (OP), investment (INV) and net income (NI).https://ir.iba.edu.pk/businessreview/vol14/iss1/2/reversal strategyrisk premiummarket volatilityliquidity provision |
| spellingShingle | Hilal Anwar Butt Mohsin Sadaqat The reversal strategy: A test case for an emerging market Business Review reversal strategy risk premium market volatility liquidity provision |
| title | The reversal strategy: A test case for an emerging market |
| title_full | The reversal strategy: A test case for an emerging market |
| title_fullStr | The reversal strategy: A test case for an emerging market |
| title_full_unstemmed | The reversal strategy: A test case for an emerging market |
| title_short | The reversal strategy: A test case for an emerging market |
| title_sort | reversal strategy a test case for an emerging market |
| topic | reversal strategy risk premium market volatility liquidity provision |
| url | https://ir.iba.edu.pk/businessreview/vol14/iss1/2/ |
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