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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Investors' awareness, perceived risk attitudes, and investors' behavior: a case of Nepalese capital market / Pawan Kawan 

Public ISBD Title : Investors' awareness, perceived risk attitudes, and investors' behavior: a case of Nepalese capital market Material Type: printed text Authors: Pawan Kawan, Author Publication Date: 2014 Pagination: 95p. Size: GRP/Thesis Accompanying material: 4/B General note: Including bibilography Languages : English Descriptors: Banks and banking Common stock Stock exchanges Stocks Keywords: 'stocks market  stock exchanges  banks  banks and banking  return on assests' Class number: 332.632 Abstract: Stock market is considered as one of the best ways to increase funds. The stock market is one of the most important sources for companies to raise money. This allows business to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. Stock market plays a crucial role in the financial system. Investor behavior on the stock market is often seen to be a factor of cognition, emotion and social influences. And the need to incorporate psychology attempts to explain how perception of investors and their reaction to uncertainties affect the investment decision there by influencing price movements. Capital market helps to mobilize the surplus unit to deficit unit for productive investments. As capital market mobilizes the scattered resources and channels them in productive sector, capital market is an effective instrument of expanding productive capacities of the country. Although there is an abundant academic literature on global stock market, especially in the developed countries, but one finds little literature on the Nepali stock market. The study on investors’ awareness, perceived risk attitudes and investors’ behavior is comparatively less in Nepal as compared to other developed countries. The trading in share market is not just affected by the information but also by other factors such as psychological factors, education and income. It is seen that investors are more reliable and attached with a particular type of investment alternatives. The prominent issues in the stock market might be the fluctuating stock market indices, the capital centric trading system, limited numbers of dominant investors, and their influences in stock market. The primary sources of data have been used to assess the opinion of respondents with respect to investor awareness, perceived risk attitudes and investor behavior in case of Nepalese capital market. The questionnaire survey has been conducted to record the opinions, perceptions, and characteristics of investors in Nepalese capital market. The stock investors are selected from different brokers’ floors in Kathmandu and personally known investor friends and relatives. The selection of the brokers’ floor is based on the random sampling procedure. The structured questionnaires in English medium with 35 questions were distributed among the investors. The study was conducted in Kathmandu valley by distributing 300 questionnaires through field survey and email survey method. 120 questionnaires were distributed in field survey where 77 responses received. Likewise 180 questionnaires were distributed in email survey where 138 responses received. Thus there are altogether 215 respondents on which the entire study depends. The study classified investors into 3 categories which are small, medium and large investors on the basis of annual investment in shares for the purpose of comparative study and analysis. The major finding of this study is that male investors are more active in capital market and portion of married investors are large. Capital gain is the major objective of the investors. Likewise as experience of the investors increases the level of investment will also increases. Most of investors have moderate knowledge about capital market and uses fundamental analysis. Similarly investors are aware about mutual fund, CDS, credit rating agency and portfolio management services. Investors perceived that good news have positive effect on stock market, bad news have negative effect and effect of informational news is inconsistent. Investors consider political and economic changes as the major sources of information to analyze the shares while market trend as major factor affecting the investors’ behavior. Majority of investors analyzes risk and return before investment in stock market and they prefer moderate risk – moderate return. The multiple regression analysis with entire explanatory variables in model revealed that investors’ behavior is positively and significantly related with investors’ awareness and perceived risk attitudes. Similarly investors’ behavior is positively and significantly related with social learning, financial awareness, affective and cognitive aspects. The recommendation put forward by this study is that regulating authorities should encourage female investors to invest in stock market by providing awareness about capital market as male investors dominate the Nepalese stock market. Likewise small investors should encourage transacting in secondary market by providing efficient market information. To increase the investors’ level of knowledge about capital market, regulating authorities must introduce different awareness programs. Similarly concern authorities should create suitable environment to boost confidence of the investors by formulating suitable rules and regulation. Finally, investors are recommended to invest based on market information rather than other individual's decisions. Investors' awareness, perceived risk attitudes, and investors' behavior: a case of Nepalese capital market [printed text] / Pawan Kawan, Author . - 2014 . - 95p. ; GRP/Thesis + 4/B. Including bibilography Languages : English Descriptors: Banks and banking Common stock Stock exchanges Stocks Keywords: 'stocks market  stock exchanges  banks  banks and banking  return on assests' Class number: 332.632 Abstract: Stock market is considered as one of the best ways to increase funds. The stock market is one of the most important sources for companies to raise money. This allows business to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. Stock market plays a crucial role in the financial system. Investor behavior on the stock market is often seen to be a factor of cognition, emotion and social influences. And the need to incorporate psychology attempts to explain how perception of investors and their reaction to uncertainties affect the investment decision there by influencing price movements. Capital market helps to mobilize the surplus unit to deficit unit for productive investments. As capital market mobilizes the scattered resources and channels them in productive sector, capital market is an effective instrument of expanding productive capacities of the country. Although there is an abundant academic literature on global stock market, especially in the developed countries, but one finds little literature on the Nepali stock market. The study on investors’ awareness, perceived risk attitudes and investors’ behavior is comparatively less in Nepal as compared to other developed countries. The trading in share market is not just affected by the information but also by other factors such as psychological factors, education and income. It is seen that investors are more reliable and attached with a particular type of investment alternatives. The prominent issues in the stock market might be the fluctuating stock market indices, the capital centric trading system, limited numbers of dominant investors, and their influences in stock market. The primary sources of data have been used to assess the opinion of respondents with respect to investor awareness, perceived risk attitudes and investor behavior in case of Nepalese capital market. The questionnaire survey has been conducted to record the opinions, perceptions, and characteristics of investors in Nepalese capital market. The stock investors are selected from different brokers’ floors in Kathmandu and personally known investor friends and relatives. The selection of the brokers’ floor is based on the random sampling procedure. The structured questionnaires in English medium with 35 questions were distributed among the investors. The study was conducted in Kathmandu valley by distributing 300 questionnaires through field survey and email survey method. 120 questionnaires were distributed in field survey where 77 responses received. Likewise 180 questionnaires were distributed in email survey where 138 responses received. Thus there are altogether 215 respondents on which the entire study depends. The study classified investors into 3 categories which are small, medium and large investors on the basis of annual investment in shares for the purpose of comparative study and analysis. The major finding of this study is that male investors are more active in capital market and portion of married investors are large. Capital gain is the major objective of the investors. Likewise as experience of the investors increases the level of investment will also increases. Most of investors have moderate knowledge about capital market and uses fundamental analysis. Similarly investors are aware about mutual fund, CDS, credit rating agency and portfolio management services. Investors perceived that good news have positive effect on stock market, bad news have negative effect and effect of informational news is inconsistent. Investors consider political and economic changes as the major sources of information to analyze the shares while market trend as major factor affecting the investors’ behavior. Majority of investors analyzes risk and return before investment in stock market and they prefer moderate risk – moderate return. The multiple regression analysis with entire explanatory variables in model revealed that investors’ behavior is positively and significantly related with investors’ awareness and perceived risk attitudes. Similarly investors’ behavior is positively and significantly related with social learning, financial awareness, affective and cognitive aspects. The recommendation put forward by this study is that regulating authorities should encourage female investors to invest in stock market by providing awareness about capital market as male investors dominate the Nepalese stock market. Likewise small investors should encourage transacting in secondary market by providing efficient market information. To increase the investors’ level of knowledge about capital market, regulating authorities must introduce different awareness programs. Similarly concern authorities should create suitable environment to boost confidence of the investors by formulating suitable rules and regulation. Finally, investors are recommended to invest based on market information rather than other individual's decisions.

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