Karachi stock exchange : sectoral analysis risk and return characteristics

Abstract

The research paper is focused on the sectoral analysis and an investigation of risk and return characteristics of Karachi Stock Exchange. Companies listed on the Karachi Stock Exchange are classified into thirty-one sectors. Sectoral analysis was done for a period of five years (1999-2003) which revealed that most of the sectors showed healthy performance, for the years 2000, 2002 and 2003, in terms of market capitalization, turnover, traded value and liquidity. Textile Spinning sector showed highest number of listed companies for the year 2003 (192 companies), Fuel & Energy (oil & gas) sector showed the highest captilization or the year 2002 (169,280.487 million Rupees) and the highest turnover and trading value also for the year 2002 (19,427.693 million, 964,514.047 million Rupees) while Power generation & Distribution sector showed highest liquidity for the year 2003 (20.08%). Risk and return characteristics investigated by monthly return of a using for investigated. In most sample of ten companies were three years data (2001-2003). The sample of companies was cases the higher mean returns were associated with higher standard deviations. Correlation of returns was also investigated. Beta was calculated for the respective companies, as a measure of risk, by using Capital Asset Pricing Model and Market Model. More than half of the companies in the sample showed beta value greater than 1, indicating high systematic risk. The implication of this study for researchers is to investigate risk and return characteristics of large enough sample of companies because very less work has been done in this field.