Stock Market Return, Volatility and the role of Investor Sentiments (A Case Study on Pakistan Stock Exchange)

Waqar Ahmed
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Waqar Ahmed: Department of Commerce & Accountancy, Minhaj University Lahore, Pakistan

International Journal of Research and Scientific Innovation, 2018, vol. 05, issue 10, 07-16

Abstract: This study was conducted on Pakistan stock market to find out the stock market return, volatility and the role of investors sentiments on it. Markets sentiments are inclusive thoughts of investors in the direction of a specific security/stock. Stock Market Volatility is a frequency by which the prices of a security increases or decreases for a specified sets of returns. Stock market return is a gain on an investment. The aim of the study was to find the relationship amongst stock market return and volatility on Pakistan stock exchange. Different market proxies are used to examine the investor sentiments like Stock traded volume, First day return on IPOs, Dividend Premium, Mutual Funds Flow, and Close Ends Funds Discount, Margin Borrowings, Stock Turnover Ratio. The data was collected from the Pakistan stocks exchange, National Clearing Company of the Pakistan, Central Depository Company. Investor sentiments used as an independent variable and stocks market volatility used as a dependent variable. Arch regression model used to examines the association among dependent (Stocks Market Volatility) and Independent variable (Investors sentiments). Arch regression model effect that it is good fit to our research model, and according to results show that Stock Traded Volume Negative and insignificant relationship with volatility, First day return on IPO have positive but insignificant relationship with stock market volatility; Dividend Premium has positive and significant relation with stock market volatility, Margin Funds Flow have positive and significant impact on stock market volatility, Closed end Funds Discount has positive but insignificant effect on stock market volatility, Margin Borrowings have negative and insignificant impact on stock market volatility, Stock Turnover Ratio have positive and significant relationship with stock market volatility.

Date: 2018
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