Determinants of Earning Yield and Its Impact on Equity Market Returns- KSE 2010-2020

Abstract

Despite of the extensive research being done in developed markets, the empirical studies on Pakistan’s equity market are limited. The purpose of this study was to identify the determinants of earning yield and their impact on the Pakistani stock market return (KSE-100 index). Taking earning yield as a dependent variable, six out of ten variables were identified as significant, explaining only 10% of the variation in stock return. With the inculcation of industry effect, the explanatory power however, increased to 20%. The model suggests that earning yield cannot be used to predict stock market returns in volatile markets like Pakistan.