Behavioral Finance Perspectives on Pakistan Stock Market Efficiency: Assessing the Prospect Theory Empirically with an Adaptive Pattern of Efficiency across Military and Democratic Regimes

Zareen Zafar ,Danish Ahmed Siddiqui

doi:10.33844/ijol.2020.60488

Abstract

This study is based on pragmatic creations to make the hypothetical frame focusing on behavioral finance pattern for finding the sagacity of investors, stock returns, and effectiveness of stock market performance. The research investigates an extensive extent of Pakistan stock market Returns data from June 1994 to December 2018 along with the two economic segments including the Military phase (1999-2008) and Democratic phase (1994-1998) (2009-2018) to determine the Pakistan Stock market efficiency. To this end, autocorrelation and variance ratio tests were performed on the returns (weekly based) KSE 100 index during overall period as well as for both the Military Phase and the Democratic phase using adaptive pattern of market competence. The weak efficiency tests show trends of a stock performance, and consequently developing of bounded-adaptive market effectiveness. These tests recognized the presence of asymmetric dynamic behavior of returns obviousness in calculation of risk and return associations during two political states. These confirmations offer provision to investors bounded adaptive rationality, behavior, vigorous behavior of stock return and as a result establishing effectiveness of bounded adaptive market.

Highlights

The study is based on the performance and efficiency measures of the Pakistan Stock Market with the collision of political changes on stock returns data by using Autocorrelation, variance ratio testZareen Zafar & Danish Ahmed Siddiqui on segmented data
The results show that unbiased variance estimation (Homo) is significant at 1% for the null hypothesis variance ratio (VR) = 1
In democracy phase results show that unbiased variance estimation (Homo) is significant at 1% for the null hypothesis VR = 1

Summary

Introduction

The study is based on the performance and efficiency measures of the Pakistan Stock Market with the collision of political changes on stock returns data by using Autocorrelation, variance ratio testZareen Zafar & Danish Ahmed Siddiqui on segmented data. The study is based on the performance and efficiency measures of the Pakistan Stock Market with the collision of political changes on stock returns data by using Autocorrelation, variance ratio test. The segments are divisions of year wise Stock returns data of Pakistan Stock market. To measure the efficiency of Pakistan stock market by using indicators (AR and VR) is considered the second goal. The third goal is to estimate that political instability in all three segments divided as overall, military phase, and democratic phase. The era 19942018 indicates the clear picture of political instability and its impact on the Pakistan Stock Market efficiency. The gap analysis demonstrates that this sort of study has not been done before on the segmented data (overall, military phase, and democracy phase) with an aspect of stock returns to Pakistan

Methods

Results

Discussion

Conclusion