Multiscale Systematic Risk: Empirical Evidence from Pakistan

Syed Jawad Hussain Shahzad

International Journal of Economics and Empirical Research (IJEER), 2015, vol. 3, issue 12, 605-615

Abstract: Purpose: This study utilizes the wavelet approach namely Maximal Overlap Discrete Wavelet Transform (MODWT) to examine the multiscale risk-return relationship for Pakistan stock market. Methodology: The method enables scale-by-scale analysis of CAPM validity and heterogeneous market expectations. Findings: Our sample consists of 117 firms listed at Karachi stock exchange for the period January 1, 2006 to December 31, 2013. The empirical findings show that the riskreturn relationship is linear at higher (16-128 days) scales and average daily market risk premium is 23.8%. Recommendations: The study, consistent with literature, concludes that systematic risk is a multiscale phenomenon.

Keywords: CAPM; Multiscale systematic risk; Pakistan (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2015
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