SLOW DIFFUSION OF INFORMATION HYPOTHESIS AND STOCK MARKET PREDICTION: A CASE OF PAKISTAN STOCK EXCHANGE

Asad Ullah; Muhammad Nouman; Fahim Ullah

Asad Ullah 1KoUniversity of Science and Technology, Khyber Pakhtunkhwa, Pakistan
Muhammad Nouman Lecturer, IBMS, The University of Agriculture, Khyber Pakhtunkhwa, Peshawar
Fahim Ullah 3KohUniversity of Science and Technology, Khyber Pakhtunkhwa, Pakistan

Keywords: Stock Return, Industries, Diffusion of Information Hypothesis, Market Prediction

Abstract

Study aims to investigate whether large industries predict stock market return. Four industries including fuel, cement, chemical and textile have been selected on the basis of relative size. Daily Data for 70 firms from these industries have been collected over the period 2001 to 2011. Separate regression for each industry and combined regression for equally weighted portfolio of industries return have been used for analysis. The results indicate that only Fuel sector has some predictive power. On the other hand, chemical, cement and textile sectors have no predictive power. Therefore, our findings support slow diffusion of information hypothesis for the chemical, cement and textile sectors. Moreover a set of control variables is also significantly related.