Dividend Price Ratio and Stock Return: Evidence from Pakistan, India and China

1Shazia Baloch, Muhammad Hafeez, Maeenuddin*, Ashfaq Ahmad and Asma Javed

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Abstract:

This study estimated the effect of dividend premium and size in the growing capitalization markets of Pakistan, India and china. This paper examined the role of dividend in the terms of large and small firms and to correlate the dividend with stock returns. This study used monthly closing prices of 40 non-financial sector firms listed at Karachi Stock Exchange (KSE) For Pakistan, 40 from Taiwan economic journal Database (TEJ) for China and 40 from Bombay Stock Exchange (BSE) for India for the period of 2004 to 2014 based on market capitalization. Descriptive statistics and correlations analysis have been used to examine the relationshiop between the independent variables Market premium (MKT), Size premium (SMB) and dividend premium (LMH) and dependent variable stock return. Resluts from the descriptive statistics of Fama and French three factors shows that Pakistan has the highest mean value of marke premium and dividend premium, while India has the highiest mean value of size premium. Results of standard deviation shows that India has the lowes value of standard deviation of market premium and size premium, While China has the lowest value of SD for dividend premium. As per the results of the correlation anlaysis, Pakistan has the strongest negative relationsip between dividend premium (LMH) and market premium (MKT), between devidend premium and size premium and between size premium and market premium as compared to India and China. The results revealed the positive relation of stock returns and dividend in the rapidly growing markets of Pakistan, India and China. From the overall results we concluded and suggest that Strategies of Investment would be scheme by the investors on the basis of the size, market premium and dividend premium. Consequences of the study disclosed the positive relation of stock returns and dividend in the rapidly growing markets of Pakistan, India and China.

Keywords:

Bombay Stock Exchange, Dividend Premium, Fama and French, GARCH Model, Karachi Stock Exchange, Ordinary Least Square, Price Earnings Ratio, Taiwan Economic Journal.

Paper Details
Month3
Year2020
Volume24
IssueIssue 3
Pages2784-2796