An Analysis of Stock Market Behavior: Risk, Return and Stock Market Volatility in Pakistan (KSE)

Abstract

T hi s study is ex tremely s ignificant for the el aboration of the re la tionsh ip between ri sk and return and how they a ffect the stock ret urn. Thi s st ud y a lso defines the nature of volat ility a t KSE . The stu dy has been unde rtaken with res pect to Karachi Stock Exchan ge (KSE). T he research is cond ucted on the bas is of secondary d ata . Almost t hree hundred observat ions have been ana lyzed. The quantitat ive analysis has been ca rr ied ou t on the basis of top f ive active compani es . The mon thly data is used fo r an a lysi s o f last 5 year s. There are three stock exc ha nges in - . Pakistan but thi s study is limite d to Karachi Stock Exchange a nd All the analysi s are based on Karachi Stock Exchange. In th is stu dy th er e are three types of maj o r va riables. Fi rst is risk, second is return and third is vo latility. Ri sk is ind ependent vari a bl e while the return is d epend ent v ari ab le. Where, Return de pends on risk whi le the ri sk is independent. Inc rease in ri sk refe rs to increase in retu rn with cert ain rat io . As wel l as d ecrease in ri sk r efe rs to decrease in return wi th c ert a in r at io . So, th ere is + 1 r elation between risk and r eturn . The s tock ma rke t vo lat i l ity is modera ting vari abl e. It influe nces both the vari a bles ind epe nden t (r isk) and d epe ndent ( return) . T hi s s tudy i s a lso very useful for the investors , because it a llows the in ves to rs to manage their p o rt fo lios in a bett er way by keeping in view the re la tions hi p be tween risk and return. The knowledge of r isk and i ts re latio nship wi th the s tock pri ces is hi ghl y s igni f icant for inv esto rs.