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Three empirical studies on market efficiency – evidence from the Pakistan stock exchange

Ahmed, Rizwan


Rizwan Ahmed


Subhan Ullah

Mark J. Rhodes


The thesis is comprised of three interrelated empirical chapters on the Pakistan stock exchange which effects on the market efficiency. In the first empirical chapter, ‘Is the Market Efficient – Evidence from Pakistan stock exchange’. It is evaluating the short and long run market efficiency of the stock market from the period of Jan-2005 to Dec-2014. The chapter examines the market efficiency through using notable methodology of event study and also implementing the parametric and non-parametric test such as CAAR, t-test, Patell Z, Boehmer et al., Corrado rank and sign test. Within the chapter I have arranged the dataset based on firm size in order to evaluate whether the top 25% companies have more influence on market price in comparison with bottom 25% companies. Moreover, my data set also used the technique of market efficiency curve where my analysis is giving understanding of market reaction either it is over reacting or slow response towards the dividend announcement information. Another useful technique also implemented on the dividend announcement to identify the respective information as the good news, bad news or neutral. The results indicate strong evidence in support of dividend announcement towards market reaction. The results from this chapter show evidence in support of weak form of market efficiency in the context of the Pakistan stock exchange.
The next empirical chapter entitled “Implementation of new price impact ratios: Evidence from the Pakistan stock Exchange” examines the liquidity measures, and, getting inspiration of the recent research of Florackis et al. (2011). The empirical chapter analyse two latest liquidity measures developed by Amihud (2002) return-to-volume (RtoV) and Florackis et al. (2011) return-to-turnover (RtoTR). Both the measures implemented into the Pakistan stock exchange. The results are more align with Florackis et al. (2011) (RtoTR) which suggests that lower RtoTR values indicates higher returns in contrast of high RtoTR ratio. Moreover, the results are also consistent with the work of Florackis et al. (2011) and Amihud and Mendelson (1986a) where trading frequency and trading cost are important features for evaluating the returns. In addition, the findings relating to RtoV ratio indicates the negative correlation with market capitalisation which explains that small stocks are illiquid.
In the third empirical chapter, “Market Efficiency and Anomalies: Evidence from the Pakistan Stock Exchange” analysis is based on examining any existence of market anomalies in the Pakistan stock exchange. The analysis is considering three major anomalies i.e. day of the week effect which includes weekend effect as well, month of the year effect and holiday effect in Pakistan stock market. The importance of the particular study is to scrutinise the market anomalies by using one data set through implementation of ARCH and GARCH models. The results indicate that Pakistan stock exchange has a seasonality effect on weekend (Friday), Monday and Tuesday. The major anomalies exist in the month of August which explains the year end effect and in Pakistan the tax year ends in the month of June, additionally the announcement of budget from Government announced during the June (Federal) and July in (Provinces). However, holiday effect has no particular trend in the Pakistan stock market.


Ahmed, R. (2017). Three empirical studies on market efficiency – evidence from the Pakistan stock exchange. (Thesis). University of Hull. Retrieved from

Thesis Type Thesis
Deposit Date Aug 6, 2021
Publicly Available Date Feb 23, 2023
Keywords Business
Public URL
Additional Information Business School, The University of Hull
Award Date Dec 1, 2017


Thesis (4.5 Mb)

Copyright Statement
© 2017 Ahmed, Rizwan. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright holder.

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