Bilal AnwarFollow

Degree

Master of Science in Finance

Department

Department of Finance

School

School of Business Studies (SBS)

Date of Submission

Spring 2024

Supervisor

Dr. Hilal Anwar Butt, Professor and Chairperson, Department of Finance

Submission Type

Research Project

Document Type

Restricted Access

Pages

viii, 31

Keywords

Maximum Daily Return, MAX effect, Extreme Returns, Asset Pricing

Abstract

Existing research in the space of asset pricing has shown evidence that past stocks return can determine future stock returns. In particular, research on developed equity markets have shown that going long in stocks with highest daily return in the preceding month (MAX) and shorting stocks with the lowest MAX, yields negative average monthly return. This relation has not been widely studied in developing markets. In this thesis, I explore this relation by evaluating stock returns in the Pakistani equity market. I investigate this relation by applying portfolio level analysis. In line with existing literature, the cohort of significant MAX stocks are characterized by low market capitalization, price and liquidity, as well as significant volatility and skewness. However, the empirical results of this thesis indicate that the Pakistani equity market does not exhibit the same relationship between MAX and future returns as in developed equity markets. This relationship was further investigated by considering the 3-day cumulative highest return (MAX3) and multi-day average highest daily return (MAX(N)). Contrary to existing evidence, the high-low portfolio of stocks sorted on MAX yielded positive average returns under equal weights, whereas when using value weightages, the difference portfolio yielded negative average returns. However, the difference portfolio returns were almost all statistically insignificant.

Download

Available for download on Thursday, February 12, 2026

The full text of this document is only accessible to authorized users.

Share

COinS