Firm Financial Performance And Stock Prices:

Evidence From The Pakistan Stock Exchange

(PSX)

Group Members: Agam Kumar (2047233)

Alizain Akber (2047238)
Saad Ali Khan (2047264)
Descriptive Statistics

Variable Obs Mean Std. Dev. Min Max

SP 1386 150.73 238.27 .97 1771.8

NPM 1386 8.538 19.944 -213.57 378.08

ROE 1386 14.48 18.459 -119.69 153.59

DER 1386 80.159 98.693 0 1221.08

FS 1386 16.401 1.494 11.266 21.077

 Matrix of correlations

Variables (1) (2) (3) (4) (5)

(1) SP 1.000

(2) NPM 0.055 1.000

(3) ROE 0.167 0.385 1.000

(4) DER -0.144 -0.215 -0.284 1.000

(5) FS 0.293 0.204 0.176 -0.020 1.000

 OLS Model
Linear regression

SP Coef. St.Err. t-value p-value [95% Conf Interval] Sig

NPM -.866 .334 -2.59 .01 -1.521 -.211 ***

ROE 1.422 .365 3.89 0 .705 2.138 ***

DER -.297 .064 -4.62 0 -.423 -.171 ***

FS 45.68 4.151 11.00 0 37.538 53.823 ***

Constant -587.867 67.535 -8.70 0 -720.349 -455.385 ***

Mean dependent var 150.730 SD dependent var 238.270

R-squared 0.116 Number of obs 1386

F-test 45.420 Prob > F 0.000

Akaike crit. (AIC) 18943.274 Bayesian crit. (BIC) 18969.445

*** p<.01, ** p<.05, * p<.1

 Jarque-Bera normality test:
Jarque-Bera test for Ho: normality: 406.4 Chi(2): 5.6e-89

 Multicollinearity Test
VIF 1/VIF
ROE 1.252 .799
NPM 1.22 .82
DER 1.106 .904
FS 1.058 .945
Mean VIF 1.159 .
 White's test

Ho: homoskedasticity
Ha: unrestricted heteroskedasticity
chi2(14) = 79.09
Prob > chi2 = 0.0000
Cameron & Trivedi's decomposition of the IM-test

Source chi2 df p

Heteroskedasticity 79.090 14 0.000

Skewness 73.100 4 0.000

Kurtosis 20.190 1 0.000

Total 172.380 19 0.000

 Fixed-effect Model
Regression results

SP Coef. St.Err. t-value p-value [95% Conf. Interval] Sig

NPM .084 .257 0.33 .744 -.42 .588
ROE 1.111 .278 4.00 0 .566 1.656 ***
DER .081 .056 1.46 .144 -.028 .191
FS 112.414 6.866 16.37 0 98.943 125.884 ***
Constant -1716.308 112.988 -15.19 0 -1937.97 -1494.646 ***

sigma_u 212.3717
sigma_e 136.9433
(fraction of variance due to u_i)
rho 0.706313

Mean dependent var 150.730 SD dependent var 238.270

R-squared 0.180 Number of obs 1386
F-test 70.359 Prob > F 0.000
Akaike crit. (AIC) 17473.310 Bayesian crit. (BIC) 17499.481

*** p<.01, ** p<.05, * p<.1

 Random-effect Model
Regression results
SP Coef. St.Err. t-value p-value [95% Conf. Interval] Sig
NPM -.004 .257 -0.02 .987 -.508 .5
ROE 1.048 .278 3.77 0 .503 1.592 ***
DER .05 .055 0.91 .364 -.058 .158
FS 94.604 6.106 15.49 0 82.636 106.571 ***
Constant -1420.028 101.9 -13.94 0 -1619.748 -1220.307 ***

sigma_u 170.5451
sigma_e 136.9433
rho 0.607989 (fraction of variance due to u_i)

Mean dependent var 150.730 SD dependent var 238.270

Overall r-squared 0.091 Number of obs 1386
Chi-square 254.233 Prob > chi2 0.000
R-squared within 0.180 R-squared between 0.080

*** p<.01, ** p<.05, * p<.1

Hausman (1978) specification
test
GMM Dynamic Panel
 Sargan test
H0: overidentifying restrictions are valid
chi2(87) = 93.23961
Prob > chi2 = 0.3042
 Arellano-Bond test
For zero autocorrelation in first-differenced errors
H0: no autocorrelation

Order z Prob > z

1 -3.791 0.000

2 -1.777 0.076
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