Abstract:
The study describes the “Relationship of stock’s returns with its determinants and then compare their results on the basis of small and large capitalization”. I have selected ten firms five of small capitalization and five of large capitalization. In my model Stock’s return was dependent variable and Risk, Liquidity and Exchange rate were independent variables. I have taken four years monthly data to find my results. I have used Pooled Regression method to analyze the data. And then compared the results on the basis of small and large capitalization. After applying hypothesis on the results I have found from values that for the relationship of Dependent variable Stock return and independent variables (Risk and Liquidity) null hypothesis is rejected and for relationship between Stock’s return and Exchange Rate null hypothesis is accepted. Here it was to test whether β is insignificant or significant. The results were obtained in form of Coefficient, Std. Error, t-Statistic and Probability. Other techniques like R2, Durbin Watson Stat were also applied. By getting the results I have compared them on the basis of small and large cap. The main result is that two independent variables (Risk and Liquidity) are significant and one variable Exchange Rate is insignificant. It means there are some other factors which are affecting returns of Stocks.
