The Conditional Capital Asset Pricing Model: Evidence from Karachi Stock Exchange

This is an attempt to empirically investigate the risk and return relationship of individual stocks traded at Karachi Stock Exchange (KSE), the main equity market in Pakistan. The analysis is based on daily as well as monthly data of 49 companies and KSE 100 index is used as market factor covering the period from July 1993 to December 2004. The natural startingpoint of this study is to test the adequacy of the standard Capital Asset Pricing Model (CAPM) of Sharpe (1964) and Lintner (1965). The empirical findings do not support the standard CAPM model as a model to explain assets pricing in Pakistani equity market. The critical condition of CAPM—that there is a positive trade-off between risk and return—is rejected and residual risk plays some role in pricing risky assets. This allows for the return distribution to vary over time. The empirical results of the conditional CAPM, with time variation in market risk and risk premium, are more supported by the KSE data, where lagged macroeconomic variables, mostly containing business cycle information, are used for conditioning information. The information set includes the first lag of the following business cycle variables: market return, call money rate, term structure, inflation rate, foreign exchange rate, growth in industrial production, growth in real consumption, and growth in oil prices. In a nutshell, the results confirm the hypothesis that risk premium is time-varying type in Pakistani stock market and it strengthens the notion that rational asset pricing is working, although inefficiencies are also present in unconditional and conditional settings. The observation is that the dynamic size and book-to-market value coefficient explain the cross-section of expected returns in a few sub-periods. The conditional approach to testing the CAPM and the three-factor CAPM shows that the asset prices relationship is better explained by accommodating business cycle variables as information set. The findings of the conditional three-factor CAPM also give support to the fact that time-varying firm attributes have only a limited role in Pakistani market to explain the asset price behaviour.Capital Asset Pricing Model, Fama-French Three Factor Model, Market Risk, Residual Risk, Size, Book-to-market Value, Information Set, Business Cycle Variables

Test of Multi-moment Capital Asset Pricing Model: Evidence from Karachi Stock Exchange

This study examines the Capital Asset Pricing Model of Sharpe (1964) Lintner (1965) and Black (1972) as the benchmark model in the asset pricing theory. The empirical findings indicate that the Sharpe-Lintner-Black CAPM inadequately, particularly the explains Pakistan’s equity market economically and statistically significant role of market risk for the determination of expected returns. Instead of identifying more risk factors, a detailed analysis of a single risk factor is undertaken. We have concentrated on two main extensions of the standard CAPM model. First, the standard model is extended by taking higher moments into account. Second, the risk factors are allowed to vary over time in the autoregressive process. The result of unconditional non-linear generalisation of the standard model reveals that in the higher-moment CAPM model the investors are rewarded for co-skewness risk. However, the test provides marginal support for rewards of the co-kurtosis risk. Finally, the empirical usefulness of conditional higher moments in explaining the cross-section of asset return is investigated. The results indicate that the conditional co-skewness is an important determinant of asset pricing, and the asset pricing relationship varies through time. The conditional covariance and the conditional co-kurtosis explain the asset price relationship in a limited way. It is concluded that Kraus and Litzenberger (1976) attempts to develop a modified form of the Sharpe- Lintner-Black CAPM and is more successful with KSE data.Covariance, Co-skewness, Co-kurtosis, Non-normal Return Distribution, Capital Asset Pricing Model, Time-varying Moments.

Annealing-induced Fe oxide nanostructures on GaAs

We report the evolution of Fe oxide nanostructures on GaAs(100) upon pre- and post-growth annealing conditions. GaAs nanoscale pyramids were formed on the GaAs surface due to wet etching and thermal annealing. An 8.0-nm epitaxial Fe film was grown, oxidized, and annealed using a gradient temperature method. During the process the nanostripes were formed, and the evolution has been demonstrated using transmission and reflection high energy electron diffraction, and scanning electron microscopy. These nanostripes; exhibited uniaxial magnetic anisotropy. The formation of these nanostructures is attributed to surface anisotropy, which in addition could explain the observed uniaxial magnetic anisotropy

Results from K2K and status of T2K

Results from the K2K experiment and status of the T2K experiment are reported.Comment: 9 pages, 6 figures. Talk at International Conference on New Trends in High-Energy Physics (Crimea2005), Yalta, Ukraine, September 10-17, 200

Corrections to Tribimaximal Mixing from Nondegenerate Phases

We propose a seesaw scenario that possible corrections to the tribimaximal pattern of lepton mixing are due to the small phase splitting of the right-handed neutrino mass matrix. we show that the small deviations can be expressed analytically in terms of two splitting parameters($\delta_1$ and $\delta_2$) in the leading order. The solar mixing angle $\theta_{12}$ favors a relatively smaller value compared to zero order value ($35.3^\circ$), and the Dirac type CP phase $\delta$ chooses a nearly maximal one. The two Majorana type CP phases $\rho$ and $\sigma$ turn out to be a nearly linear dependence. Also a normal hierarchy neutrino mass spectrum is favored due to the stability of perturbation calculations.Comment: 19 pages 6 figures, Accepted by Mod. Phy. Lett.