Expected stock returns of NEPSE: evidence from Nepalese bank / Dinesh Kiorala 

Public ISBD Title : Expected stock returns of NEPSE: evidence from Nepalese bank Material Type: printed text Authors: Dinesh Kiorala, Author Publication Date: 2013 Pagination: 111p. Size: GRP/Thesis Accompanying material: 1/B General note: Including bibilography Languages : English Descriptors: Common stock Investment Nepal Nepal Stock Exchange Profits Rate of return Stock exchange Stocks Keywords: 'stocks  banks  bank and banking  profits  common stock  stocks  nepal  investment  rate of return' Class number: 332.642 Abstract: The study on expected stock returns provides an important insight into the understanding of pricing implication of common stock. This study basically aimed at examining the variations in common stock returns with respect to firm specific variables and also attempted to evaluate the causal relationship between stock market returns and macroeconomic variables in Nepal. The specific objectives of the study are: (a) to examine the stock return in Nepalese stock market, (b) to analyze the factors that influence the stock return, (c) to examine the relationship between company specific variables and expected return, (d) to assess the impact of company specific variables on expected return on NEPSE and compare the results with the evidence of developed countries, (e) to analyze the views of chief executives, mangers, financial officer and operation officer regarding the level of stock return. The proposed study could be used by financial institutions, researchers, policy makers, and mangers to examine and understand behavior of stock return in context of Nepal. Present study focused on the limitation as study includes only the selected commercial banks. Although this study used the earliest data available for the NEPSE, still had a work on a much smaller sample of returns as compared to the tests conducted on established markets such as the New York Stock Exchange or the Tokyo Stock Exchange? Hence, power of this study test may not be applicable all over the world. The analysis of the one-way sort of portfolios on stock beta, size, earnings-to-price ratios, book to market ratio, and sales to price ratio shows that larger bank size, beta, book to market ratio, sales to price ratio have higher returns, where as the firms with higher earning to price ratio have lower returns. The results indicate that variability associated with stock returns is larger for the bank with larger size, higher stock beta, book to market ratio, sales to price ratio while it is lower for the banks with high earning to price ratios. In a multiple regression of complete form, where all explanatory variables have been included, size, DY and BMR are found to have significant explanatory power while beta and EPR are not significant. The model's explanatory power is 80% and coefficient of Size and DY is positive. The regression estimates as well as portfolio analysis reveal that Size, DY and BMR are the three major variables, which explain the stock returns, and out of three variables, DY is the major explaining variable in the Nepalese stock market during the period of study. The study results showed that the coefficient of beta is never significant and it does not explain variation of stock returns. Therefore, the chief executive, mangers and officers should not base their decisions on beta alone. They should consider multiple risk factors in their decisions, of which size; DY and BMR are the most dominant ones. As the study results revealed that since size is positively related to stock returns, the firms willing to increase stock returns should increase its size. Since DY, as shown by the study, is linear with stock returns, the firms should increase the DY to increase the stock returns. The study results illustrate that the firms willing to increase stock returns should maintain lower sales to price ratio as SPR is negatively related to stock returns. The study results revealed that since BMR is negatively related to stock returns, the firms should maintain lower BMR for higher stock returns. As the study results showed that the major decisions of finance is dividend to increase stock returns, therefore, the firms willing to increase stock returns should focus their decision on dividend. With respect to decision priority to maximize return majority of the respondents gave the first priority to dividend decisions, second priority to investment decisions and third priority to financing decisions. So, the firms should increase the dividend to increase the stock returns. Majority of the respondents feel firm size of the bank as the most important factors influencing common stock returns in Nepal, followed by dividend yield. In sum up, the major findings of this study can add value to the existing literature. It may help decision makers at bank to focus on major banking activities that may increase the stock return with other competitive banks. This may also help management of commercial bank in creating appropriate strategies for attaining the estimated stock return in context of Nepal. Expected stock returns of NEPSE: evidence from Nepalese bank [printed text] / Dinesh Kiorala, Author . - 2013 . - 111p. ; GRP/Thesis + 1/B. Including bibilography Languages : English Descriptors: Common stock Investment Nepal Nepal Stock Exchange Profits Rate of return Stock exchange Stocks Keywords: 'stocks  banks  bank and banking  profits  common stock  stocks  nepal  investment  rate of return' Class number: 332.642 Abstract: The study on expected stock returns provides an important insight into the understanding of pricing implication of common stock. This study basically aimed at examining the variations in common stock returns with respect to firm specific variables and also attempted to evaluate the causal relationship between stock market returns and macroeconomic variables in Nepal. The specific objectives of the study are: (a) to examine the stock return in Nepalese stock market, (b) to analyze the factors that influence the stock return, (c) to examine the relationship between company specific variables and expected return, (d) to assess the impact of company specific variables on expected return on NEPSE and compare the results with the evidence of developed countries, (e) to analyze the views of chief executives, mangers, financial officer and operation officer regarding the level of stock return. The proposed study could be used by financial institutions, researchers, policy makers, and mangers to examine and understand behavior of stock return in context of Nepal. Present study focused on the limitation as study includes only the selected commercial banks. Although this study used the earliest data available for the NEPSE, still had a work on a much smaller sample of returns as compared to the tests conducted on established markets such as the New York Stock Exchange or the Tokyo Stock Exchange? Hence, power of this study test may not be applicable all over the world. The analysis of the one-way sort of portfolios on stock beta, size, earnings-to-price ratios, book to market ratio, and sales to price ratio shows that larger bank size, beta, book to market ratio, sales to price ratio have higher returns, where as the firms with higher earning to price ratio have lower returns. The results indicate that variability associated with stock returns is larger for the bank with larger size, higher stock beta, book to market ratio, sales to price ratio while it is lower for the banks with high earning to price ratios. In a multiple regression of complete form, where all explanatory variables have been included, size, DY and BMR are found to have significant explanatory power while beta and EPR are not significant. The model's explanatory power is 80% and coefficient of Size and DY is positive. The regression estimates as well as portfolio analysis reveal that Size, DY and BMR are the three major variables, which explain the stock returns, and out of three variables, DY is the major explaining variable in the Nepalese stock market during the period of study. The study results showed that the coefficient of beta is never significant and it does not explain variation of stock returns. Therefore, the chief executive, mangers and officers should not base their decisions on beta alone. They should consider multiple risk factors in their decisions, of which size; DY and BMR are the most dominant ones. As the study results revealed that since size is positively related to stock returns, the firms willing to increase stock returns should increase its size. Since DY, as shown by the study, is linear with stock returns, the firms should increase the DY to increase the stock returns. The study results illustrate that the firms willing to increase stock returns should maintain lower sales to price ratio as SPR is negatively related to stock returns. The study results revealed that since BMR is negatively related to stock returns, the firms should maintain lower BMR for higher stock returns. As the study results showed that the major decisions of finance is dividend to increase stock returns, therefore, the firms willing to increase stock returns should focus their decision on dividend. With respect to decision priority to maximize return majority of the respondents gave the first priority to dividend decisions, second priority to investment decisions and third priority to financing decisions. So, the firms should increase the dividend to increase the stock returns. Majority of the respondents feel firm size of the bank as the most important factors influencing common stock returns in Nepal, followed by dividend yield. In sum up, the major findings of this study can add value to the existing literature. It may help decision makers at bank to focus on major banking activities that may increase the stock return with other competitive banks. This may also help management of commercial bank in creating appropriate strategies for attaining the estimated stock return in context of Nepal.

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The effect of firm specific and macroeconomic variables on stock price of Nepalese commercial banks / Mijas Lama 

Public ISBD Title : The effect of firm specific and macroeconomic variables on stock price of Nepalese commercial banks Material Type: printed text Authors: Mijas Lama, Author Publication Date: 2016 Pagination: 93p. Size: GRP/Thesis Accompanying material: 7/B Languages : English Descriptors: Macroeconomics Class number: 332.642 Abstract: The performance of the stock market is a strong indicator of general economic performance and is an integral part of the economy of the country. With the introduction of free and open economic policies and advanced technologies, investors are finding easy access to stock markets around the world. The fact that stock market indices have become an indication of the health of the economy of a country indicates the importance of stock markets. This increasing importance of the stock market has motivated the formulation of many theories to describe the working of the stock markets (Gupta, Chevalier & Sayekt, 2008). The stock market plays a significant role in the economy of a country and important role in the allocation of resources, both directly as a source of funds and as a determinant of firms’ value and its borrowing capacity (Tease, 1993). The stock market has become an essential market playing a vital role in economic prosper that fostering capital formation and sustaining economic growth. Stock markets are more than a place to trade securities. They operate as a facilitator between savers and users of capital by means of pooling of funds, sharing risk and transferring wealth. Stock markets are essential for economic growth as they insure the flow of resources to the most productive investment opportunities. The share price is one of the most important indicators available to the investors for their decision to invest in or not a particular share (Gill et al., 2012). The stock price in the market is not static rather it changes every day. The most obvious factors that influence are demand and supply factors. Fama (1991) has suggested that the fundamental variables such as earning yield, size, book to market value, cash flow yield and leverage are the important determinants of the stock return. Srinivasan (2013) argued that understanding the impact of various fundamental variables on stock price is very much helpful to investors as it will help them in taking profitable investment decisions. This study examines the effect of firm specific and macroeconomic variables on stock price of Nepalese commercial banks with respect to banks specific variables and macroeconomic variables. The specific objectives of this study is to analyze the relationship and impact of bank size, earning per share, return on asset, dividend per share, money supply, inflation, interest rate and gross domestic product growth rate on stock price of Nepalese commercial banks. The research is based on secondary data. The methods used for secondary data analysis included descriptive analysis, correlation analysis and regression analysis. Hence, this study has employed descriptive research design and causal comparative research design. The study has taken 18 Nepalese commercial banks as a sample and 126 observations from 2007/08 to 2013/14. The result reveals that Standard Chartered bank has the highest average market price of share and highest average dividend per share where as average earning per share is highest for Nabil bank limited. It is found that the average market price of share is Rs.1021.50 where as average size is Rs.35630.11 million for Nepalese commercial banks. Similarly, average EPS is Rs.36.46 and average ROA is 1.66 percent. The Nepalese commercial banks have Rs.20.62 average DPS throughout the study period. The average stock return is found to be 12.21 percent whereas the average excess return is 7.30 percent. The result shows that there is positive relationship of market price per share with size, earning per share, dividend per share, returns on assets, money supply, inflation and gross domestic product. It indicates that an increase in size, earning per share, dividend per share, returns on assets, money supply, inflation and gross domestic product leads to an increase in the market price per share. However the beta coefficient is insignificant for inflation. Similarly, the result shows that there is negative relationship of market price per share with interest rate which reveals that higher the interest rate, lower would be the market price of share. The result also shows that stock return and excess are positively related with size, earning per share, dividend per share, and gross domestic product. It shows that an increase in size, earning per share, dividend per share and gross domestic product leads to an increase in stock return and excess return. Similarly, there is negative relationship of money supply, return on assets, inflation and interest rate with stock return and excess return which reveals that higher the money supply, size, inflation and interest rate, lower would be the stock return and excess return. However, the beta coefficient for size, inflation, interest rate and gross domestic product are significant. The effect of firm specific and macroeconomic variables on stock price of Nepalese commercial banks [printed text] / Mijas Lama, Author . - 2016 . - 93p. ; GRP/Thesis + 7/B. Languages : English Descriptors: Macroeconomics Class number: 332.642 Abstract: The performance of the stock market is a strong indicator of general economic performance and is an integral part of the economy of the country. With the introduction of free and open economic policies and advanced technologies, investors are finding easy access to stock markets around the world. The fact that stock market indices have become an indication of the health of the economy of a country indicates the importance of stock markets. This increasing importance of the stock market has motivated the formulation of many theories to describe the working of the stock markets (Gupta, Chevalier & Sayekt, 2008). The stock market plays a significant role in the economy of a country and important role in the allocation of resources, both directly as a source of funds and as a determinant of firms’ value and its borrowing capacity (Tease, 1993). The stock market has become an essential market playing a vital role in economic prosper that fostering capital formation and sustaining economic growth. Stock markets are more than a place to trade securities. They operate as a facilitator between savers and users of capital by means of pooling of funds, sharing risk and transferring wealth. Stock markets are essential for economic growth as they insure the flow of resources to the most productive investment opportunities. The share price is one of the most important indicators available to the investors for their decision to invest in or not a particular share (Gill et al., 2012). The stock price in the market is not static rather it changes every day. The most obvious factors that influence are demand and supply factors. Fama (1991) has suggested that the fundamental variables such as earning yield, size, book to market value, cash flow yield and leverage are the important determinants of the stock return. Srinivasan (2013) argued that understanding the impact of various fundamental variables on stock price is very much helpful to investors as it will help them in taking profitable investment decisions. This study examines the effect of firm specific and macroeconomic variables on stock price of Nepalese commercial banks with respect to banks specific variables and macroeconomic variables. The specific objectives of this study is to analyze the relationship and impact of bank size, earning per share, return on asset, dividend per share, money supply, inflation, interest rate and gross domestic product growth rate on stock price of Nepalese commercial banks. The research is based on secondary data. The methods used for secondary data analysis included descriptive analysis, correlation analysis and regression analysis. Hence, this study has employed descriptive research design and causal comparative research design. The study has taken 18 Nepalese commercial banks as a sample and 126 observations from 2007/08 to 2013/14. The result reveals that Standard Chartered bank has the highest average market price of share and highest average dividend per share where as average earning per share is highest for Nabil bank limited. It is found that the average market price of share is Rs.1021.50 where as average size is Rs.35630.11 million for Nepalese commercial banks. Similarly, average EPS is Rs.36.46 and average ROA is 1.66 percent. The Nepalese commercial banks have Rs.20.62 average DPS throughout the study period. The average stock return is found to be 12.21 percent whereas the average excess return is 7.30 percent. The result shows that there is positive relationship of market price per share with size, earning per share, dividend per share, returns on assets, money supply, inflation and gross domestic product. It indicates that an increase in size, earning per share, dividend per share, returns on assets, money supply, inflation and gross domestic product leads to an increase in the market price per share. However the beta coefficient is insignificant for inflation. Similarly, the result shows that there is negative relationship of market price per share with interest rate which reveals that higher the interest rate, lower would be the market price of share. The result also shows that stock return and excess are positively related with size, earning per share, dividend per share, and gross domestic product. It shows that an increase in size, earning per share, dividend per share and gross domestic product leads to an increase in stock return and excess return. Similarly, there is negative relationship of money supply, return on assets, inflation and interest rate with stock return and excess return which reveals that higher the money supply, size, inflation and interest rate, lower would be the stock return and excess return. However, the beta coefficient for size, inflation, interest rate and gross domestic product are significant.

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