The Effect of Illiquidity and Other Stock Characteristics on Stock Return on The KSE 100 Index

Abstract

This research focuses on examining the effects of illiquidity, size, risk, dividend yield, and beta on stock returns in companies listed on the KSE100 Index. The study incorporates relevant literature and utilizes data from the KSE100 Index from 2015 to 2022 to address the research questions and determine the impact of these independent variables on stock returns. The literature review highlights the importance of stock liquidity in influencing stock prices and returns, with previous studies providing inconsistent findings regarding the relationship between illiquidity and stock returns. Additionally, the literature review emphasizes the influence of other stock characteristics, such as size, risk, dividend yield, and beta, on stock returns. The proposed study aims to contribute to existing literature by investigating these relationships in the context of the KSE100 Index and providing insights for investors, policymakers, and market participants. The research hypothesis suggests that illiquidity has a positive effect on stock returns, size has a negative effect, beta has a positive effect, risk has a positive effect, and dividend yield has a negative effect. The study utilizes multiple linear regression analysis to test these hypotheses and analyze the impact of the independent variables on stock returns. The findings of this study will enhance understanding of the factors influencing stock returns in the KSE100 Index and provide valuable insights for investment decision-making in the context of the KSE100 Index.