DefinePK

Abstract

This study finds strong evidence of volatility inertia in returns at Karachi Stock Exchange and a mixed evidence for the presence of risk premium. The main finding of the study is that contrary to theory the positive return shocks have greater effect on volatility than the negative shocks. The study concludes that current recession in the stock market reflects weak fundamentals rather than pessimistic sentiments. Government interventions to artificially improve the market outlook are unlikely to produce sustainable effects and can result in market inefficiency