NDLI: Cash to Price Ratio & Stock Returns: Evidence from Emerging Markets

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Cash to Price Ratio & Stock Returns: Evidence from Emerging Markets

Content Provider	Scilit
Author	Fatima, Nudrat Waqas, Muhammad Hassan, Rameez Fraz, Ahmad Arif, Muhammad
Copyright Year	2017
Description	This study examines the impact of size premium and value premium on average return in emerging economies i.e. Pakistan, India and China equity markets for the period from June 2000 to June 2015 by using three factors model. This study predicts the significance and positive relationship between value premium(C/P Ratio) and stock return for all non-financial companies listed on Karachi stock exchange, Bombay stock exchange and Shanghai stock exchange on the basis of market Capitalization. The regression results of the study illustrate that size premium predict returns more for small firms than big firms while market premium found significantly positive with stock returns in Pakistan, India, and China. Value premium is found positive for all created portfolios. Therefore, it can be concluded that value effect is present in three emerging markets. High C/P ratio outperforms the low C/P ratio stocks. In this study C/P ratio (value premium) integrated with size and market premium to check whether it can predict stock returns of small and large firms for high or low C/P ratio. The finding is similar that the positive relationship of value premium and stock return and the negative relationship of size premium and stock return. The explanatory power of Fama and French three-factor model is greater than CAPM for all three equity markets, so, the asset pricing model can facilitate investors in efficient portfolio diversification for getting enhanced returns.
ISSN	1916971X
e-ISSN	19169728
DOI	10.5539/ijef.v9n11p153
Journal	International Journal of Economics and Finance
Issue Number	11
Volume Number	9
Language	English
Publisher	Canadian Center of Science and Education
Publisher Date	2017-09-20
Access Restriction	Open
Subject Keyword	Applied Ethics Size Premium Value Premium Stock Return Factors Model
Content Type	Text
Resource Type	Article

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