TAF PUBLISHING

Using a sample of 466 non-financial firms from Pakistan Stock Exchange for the period from 2007 to 2017, this thesis examines the momentum effects by employing 25 momentum strategies. Furthermore, this thesis also used Capital Asset Pricing Model (CAPM) and Carthart four factors model for risk factors analysis. The results of Carthart four factor model shows that there is a robust relationship between risk and returns because of systematic risk and likewise, the coefficient of size factor (SMB) positive and statistically highly significant implies that small minus big stock is explain the portfolios returns. Conversely, the coefficient of factors (HML) and momentum factors (MOM) negative and highly significant implies that the momentum and HML factor perfectly negatively explains the dependent variable and the momentum profits are almost vanished. Furthermore, it is concluded that Carhart models is able to define variation in stock return for above given factors and is appropriate for Pakistan Stock Exchange. The results of short term momentum monthly 25 momentum strategies as well as long term 16 Strategies indicates the in-existence of momentum in Pakistan stock. Furthermore, this thesis found that only 1/3 and 6/9 strategies produce abnormal return and this returns is due to systematic risk and manager performance respectively. This study concluded that all momentum portfolios confirmed that there are no momentums effects exist in Pakistan Stock Exchange. This study suggests that investors should avoid investing in Pakistan capital market based on momentum strategies. This thesis recommends that sample should be increased and used to daily stock, bond, commodities data to revisit the momentum effects. Furthermore, contrarian momentums as well as early and late stage momentum strategies should apply in order to see the existence and robustness of momentum.