Size premium, value premium and market timing: evidence from an emerging economy

Syed Haroon Rashid, Mohsin Sadaqat, Khalil Jebran and Zulfiqar Ali Memon
Additional contact information
Syed Haroon Rashid: National University of Sciences and Technology (NUST)
Mohsin Sadaqat: National University of Sciences and Technology (NUST)
Khalil Jebran: Dongbei University of Finance and Economics
Zulfiqar Ali Memon: Dongbei University of Finance and Economics

Journal of Economics, Finance and Administrative Science, 2018, vol. 23, issue 46, 266-288

Abstract: Purpose – This study aims to investigate the market timing strategy in different market conditions (i.e. up, down, normal and in-financial-crisis situation) in the emerging market of Pakistan over the period 1995 to 2015. Furthermore, this study tests the validity of the capital asset pricing model (CAPM) and Fama and French model. Design/methodology/approach – This study considers monthly stock returns of 167 firms and constructs six different portfolios on the basis of different size and book to market ratio. The Treynor and Mazuy model is used to capture the market timing strategy. Findings – The results indicate evidence of the market timing in normal market conditions. However, there is less supportive evidence of market timing in up-market, down-market and in-financial-crisis situations. This study also confirms the validity of the capital asset pricing model and Fama and French three-factor model with strong support of value premium and size premium in the stock market. Practical implications – The findings of this study are helpful to companies in estimating the cost of issuing equity more accurately. The investors can use market timing to make their investment in a more better and profitable manner. Originality/value – Unlike other previous studies, this study considers an extended period to test the validity of the capital asset pricing model and Fama and French model. In addition, this study is novel in testing the marketing timing of the firms in the context of emerging economy of Pakistan.

Keywords: Pakistan; Emerging market; Market timing; CAPM; Size premium; Value premium (search for similar items in EconPapers)
JEL-codes: O53 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3289648 Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:joefas:0131

Access Statistics for this article

Journal of Economics, Finance and Administrative Science is currently edited by Nestor U. Salcedo

More articles in Journal of Economics, Finance and Administrative Science from Universidad ESAN 1652 Alonso de Molina, Santiago de Surco 15023, Lima, Peru. Contact information at EDIRC.
Bibliographic data for series maintained by ESAN Ediciones ().