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Social and Behavioral Sciences Commons™
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Full-Text Articles in Social and Behavioral Sciences
Quality Minus Junk Factor: A Study On Asset Pricing Dynamics In The Equity Market Of Pakistan, Shahrbano ., Sumayya Chughtai, Tahira Awan
Quality Minus Junk Factor: A Study On Asset Pricing Dynamics In The Equity Market Of Pakistan, Shahrbano ., Sumayya Chughtai, Tahira Awan
Business Review
This study examines the role of quality minus junk factor in explaining cross-sectional differences in stock returns for the equity market of Pakistan. A new factor quality minus junk has been added to the existing Fama & French three factor model (1993) as a fourth factor to check whether it is priced as a risk factor. The study also compares the explanatory power of the newly proposed model with the existing single-factor Capital Asset Pricing Model (CAPM) and Fama & French three factor model (1993). A high quality data set of 70 non-financial firms listed on the PSX is employed …
Estimating Proportion Of Noise Traders And Asset Prices, Mirza Faizan Ahmed
Estimating Proportion Of Noise Traders And Asset Prices, Mirza Faizan Ahmed
Business Review
This paper provides empirical evidence of the presence, proportion and trading behavior of noise traders in the U.S. equity market (S&P500 index). A simple methodology is used to estimate the heterogeneous agent asset pricing model involving noise traders’ risk, through GMM. Departing from previous estimations of heterogeneous agent models, it estimates fundamental price using the consumption-based asset pricing model and noise traders’ misperception as deviation from this price. It concludes that noise traders exist in the S&P500, they exaggerate price expectations as compared to fundamental traders, and traders (or investors) are rational, on average.