Friday 11 January 2013
Stock Market Anomalies
Learning Objective: To develop an understanding about existence of anomalies in the stock market.
Learning Outcome: After going through this GDB, the learner would be able to identify the existence and impact of market anomalies especially the impact of the “January” with reference to Pakistani stock markets.
Case
Mr. A received Rs.10 million as inheritance. He wants to invest this amount in stock market. One of his family uncles – Mr. Uncle has good amount of experience of working in the Pakistani stock markets. He approached him for an advice to create and accumulate quantum of wealth for his own future. As, he himself is unaware of the stock market functions. Uncle started his advice with a quote - there is no free lunch in the stock market. Every investor has to strive, even for a fractional return. To beat the market is not an easy task, so he advised him to invest but in a smaller amount, being a new entrant in the stock market. He advised him to invest particularly in the month of January in small cap companies. One reason for this is the persistence of certain anomalies in the stock market that have the ability to fascinate many investors. It has been experienced in the past that January is the best month to invest and earn relatively high in the small company stocks. Most of the small-cap companies outperformed in the month of January that is why many investors want to continue to hold the stocks of small-cap companies in the next few weeks.
Requirement: In order to help Mr. A, you are required to explore, does this financial market anomaly - The January Effect exist in Pakistani stock market? Your comment should be supported by logical reasoning.
Note: In order to comment on the above issue, you are required to read the following article. These articles will help you in your comments based on the real time data. Read these articles to take concept from them. Concentrate on the highlighted text in articles. Do not copy material from the articles; write in your own words.
Learning Objective: To develop an understanding about existence of anomalies in the stock market.
Learning Outcome: After going through this GDB, the learner would be able to identify the existence and impact of market anomalies especially the impact of the “January” with reference to Pakistani stock markets.
Case
Mr. A received Rs.10 million as inheritance. He wants to invest this amount in stock market. One of his family uncles – Mr. Uncle has good amount of experience of working in the Pakistani stock markets. He approached him for an advice to create and accumulate quantum of wealth for his own future. As, he himself is unaware of the stock market functions. Uncle started his advice with a quote - there is no free lunch in the stock market. Every investor has to strive, even for a fractional return. To beat the market is not an easy task, so he advised him to invest but in a smaller amount, being a new entrant in the stock market. He advised him to invest particularly in the month of January in small cap companies. One reason for this is the persistence of certain anomalies in the stock market that have the ability to fascinate many investors. It has been experienced in the past that January is the best month to invest and earn relatively high in the small company stocks. Most of the small-cap companies outperformed in the month of January that is why many investors want to continue to hold the stocks of small-cap companies in the next few weeks.
Requirement: In order to help Mr. A, you are required to explore, does this financial market anomaly - The January Effect exist in Pakistani stock market? Your comment should be supported by logical reasoning.
Note: In order to comment on the above issue, you are required to read the following article. These articles will help you in your comments based on the real time data. Read these articles to take concept from them. Concentrate on the highlighted text in articles. Do not copy material from the articles; write in your own words.
