CORPORATE FINANCE presentation.pptx alljh

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1. WELCOME To Our Presentation Group 5

2. 01 02 03 04 Group Members Fariha Amin BSAT 031 Fizza Arshad BSAT 023 Nailah Javed BSAT 039 Iqra Salman BSAT 022

3. Adaptive Market Hypothesis: ( Comparison of Islamic and Conventional Stock Indices)

4. Adaptive Market Hypothesis INTRODUCTION “The adaptive market hypothesis (AMH) combines principles of the well-known and often controversial efficient market hypothesis (EMH) with behavioral finance .” The AMH is based on the following basic tenets: People are motivated by their own self-interests They naturally make mistakes They learn from these mistakes

5. Comparison VS Islamic Stock Conventional Stock Product are designed with shariah law Restrict stocks of companies dealing in unlawful activities Restricted chargers of interest Not based on religious law and guidelines Not restricted any unlawful activities Not restricted any charges of interest

6. Empricial Methods and Procedure

7. DATA Our sample comprises of 18 stock indices 9 Dow Jones Islamic Market Indices ( DJIMIs ) 9 conventional stock indices (MSCI indices) The indices cover various regions, economies, and countries Both DJIMIs and MSCI indices are market value weighted DJIMIs are Shariah-compliant Return Calculation Daily natural log returns calculated using the following formula: Ri,t = ln( Pi,t / Pi,t-1)

8. Automatic Variance Ratio Test The Automatic Variance Ratio (AVR) test is a statistical test used to assess the efficiency of a financial market. It is a specific type of variance ratio (VR) test developed to address limitations of the original VR test. Variance Ratio (VR) Test traditional test for weak-form market efficiency Tests if a time series (e.g., stock returns) is a martingale difference sequence (MDS) MDS implies returns are unpredictable VR test: variance of n-period returns proportional to one-period return (if random)

9. Automatic Variance Ratio Test Variance Ratio (VR) Test The weighted sum of autocorrelation of asset returns as: The Empirical estimate of the VR test statistic is: Limitations : Requires choosing a holding period (k) - arbitrary choice can affect results Inconsistency issue: compensation between negative and positive autocorrelation

10. Automatic Portmanteau Test Project 4 Project 5 Project 6 The Automatic Portmanteau (AQ) test is a statistical test used to assess the efficiency of a financial market. Limitations Offsetting correlations: Positive and negative correlations might lead to a biased AVR test statistic Portmanteau Tests Original Portmanteau Test: Qp = Σ(from i =1 to p) pi^2 Sample Portmanteau Test: Qp = n * Σ(from i=1 to p) (pi^2) / (n-i) Robust Portmanteau Test: QP = n * Σ( from i =1 to p) (pi^2 / wi^2)

11. Generalized Spectral Test H( λ, x) = γ0( x) λ + 2 X∞ j=1 γ j (x) sin(j πλ) j π D2 T = T X−1 j=1 (T − j) (jπ) 2 Z R|γˆjx| 2W(dx)

12. Return Predictability Regression Topic 2 Key Events Methodology AVR>1 AVR<1 AVR Statistics Absolute AVR

13. EMPIRICAL RESULTS AND DISCUSSIONS

14. Empirical Result- Return predictability

15. Empricial Result- Return Predictability ARV test Bootstrapping MDH Martingale difference hypothesis . European UK,US Covid 19

16. This is a graph The red lines show AVR (automatic variance ratio) statistics and the green lines represent their associated 95% confidence intervals .

17. POINTS AQ test statistics Higher AQ test> low efficiency >more predictability Japan and UK Over different market conditions

18. Graph Topic 1 Topic 2 The red lines show AQ (automatic portmanteau) statistics and the black lines represent the critical value of 3.84 at 5% level of significance.