Frim Specific Return Prediction

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For the firm specific return prediction, a firm level monthly share prices, turnover and paid-up value data on KSE over eleven year period – January 2002 through December 2012 is collected from the websites of “Business Recorder and Karachi Stock Exchange” that are authentic sources of information. The data consists of monthly share prices of a large sample of 300 firms of 132 months. For risk free rate of return interest rate on 6-month Treasury bond is used. Accounting data has been collected from various bulletins of “balance sheet analysis” published by State Bank of Pakistan (SBP) Data set on “close prices” does not contain information on dividends. Mills and Coutts (1995) find that the exclusion of dividend payments is not a significant problem. This idea is, again supported by both Lakonishok and Smidt (1988) and fishe et al. (1993), who concludes that any dividend bias is relatively small and will not impact on the statistical significance of any results evidence from Draper and Paudyal (1997) adds further to this statement. However, it is noteworthy that Philips- Patrick and Schneeweis (1988) found conflicting evidence. Sample Selection and Criteria Limitation

This research study investigates the firm-specific return prediction through CAPM, Fama and French three factor model and Augmented FF three factor models. The sample consists of financial and non-financial sectors listed on KSE. The
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