The purpose of this paper is to investigate the degrees of initial public offering (IPOs) underpricing in Malaysia (listed on Main Market of Bursa Malaysia). The threat of representativeness bias is another reason to be cautious with market cap assumptions. The study supports this fair warning by highlighting a few outliers forming Case-wise diagnostics. Hence market cap investing strategy should be used with caution. The study concludes that though market cap is significantly correlated to stock returns, its predictive capacity is not significant. Evaluating the predictive power of the same variables discriminated by market cap, reveals that large-cap stocks show high informational efficiency. The Multiple OLS Regression model reported an explanatory power of 90.3%. The current study assesses the predictive power of stock risk, stock beta, consistency and market cap to predict stock returns of a stratified random sample of BSE stocks. However, complexities of modern financial markets demand empirical evidence for such assumptions. Investor expectations and investment strategies are conventionally based on market capitalization (InterActive Corp, 2018). Since there exists high disparity between listed firms in terms of key attributes such as book value, sales, profitability, leverage and liquidity - market capitalization has been conventionally used to categorize listed firms into three broad groups – large-cap, mid-cap and small-cap. Investing in stock market is becoming increasingly popular across all countries, including India.
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