Lead lag relationship and directional asymmetry in stock returns of small and large portfolios: Evidence from the Karachi Stock Exchange

Authors

Ajid Ur Rehman, Dongbei University of Economics and Finance Dalian, P.R. China
Ataullah Shah, Institute of Management Sciences, Peshawar, Pakistan

Abstract

We explore whether systematic lead-lag relationships exist among the returns of small and large portfolios and whether such portfolios show symmetrical responses to good and bad news. Regression analysis conducted on sample small and large portfolios selected from listings at the Karachi Stock Exchange shows that small stocks follow large stocks quickly in bear-market conditions but slowly in bull-market conditions. This implies that positive information is absorbed more slowly in the prices of smaller stocks than in that of larger stocks.

Keywords

Lead-leg relationship, Directional Assymetry, Smallest and Largest Stocks, Karachi Stock Echange

DOI

https://doi.org/10.54784/1990-6587.1064

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Recommended Citation

Rehman, A. U., & Shah, A. (2016). Lead lag relationship and directional asymmetry in stock returns of small and large portfolios: Evidence from the Karachi Stock Exchange. Business Review, 11(2), 1-15. Retrieved from https://doi.org/10.54784/1990-6587.1064