Impact of market and unique risk on market prices of share in Pakistan Stock Exchange

Abstract

This study tests the influence of risks on return of stock. The different risks used in this study are market risk, unique risk and total risk. The study was based on ten industries. Return of stock can be taken from thirty companies of ten sector (cement sector, chemical sector, fertilizer sector, glass and ceramics, transport sector, pharmaceutical sector, automobile assembler, cable and electrical goods, textile composite sector and refinery) three companies from each sector. Using the index figures of stock exchange of Pakistan and the prices of equity, return of equity , market risk, unique risk and total risk is calculated. A combined and sector-wise association between the risks and returns of equity was analyzed in this study. Different type of instrument have been used to find out the connection between various risks and returns of equity like, mean, standard deviation, correlation, regression and the outcomes are interpreted by the correlation, percentage of impact and significance level, through MS Excel, and find out that there was a strong positive and significant impact of unsystematic risk on stock return