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Tobin-Q, Liquidity and Momentum risk-premia: A Demonstration of Weighted Least Squares Regression Approach

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  • Mohammad AzamORCID iD verified by the author (show author details)

    Mohammad Azam

    Faculty of Management Sciences, National University of Modern Languages, Peshawar Campus, Pakistan, Pakistan

    0000-0003-1731-755X

    Corresponding author

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Azam, M. (2023). Tobin-Q, Liquidity and Momentum risk-premia: A Demonstration of Weighted Least Squares Regression Approach. SEISENSE Journal of Management, 6(1), 98-122. https://doi.org/10.33215/vm172083

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Abstract

Purpose- The basic purpose of the study is to examine whether Tobin-q, liquidity and momentum risk-premium contributes the explanatory power in terms of explaining portfolio returns in PSX.
Design/Methodology- The Weighted Least Square (WLS) regression technique is empirically used to examine the nexus between risk-factor and portfolio returns using PSX dataset. The models provide useful tools for making efficient strategies in the jurisdiction of investments and portfolio constructions.
Findings- The study reveals that multidimensional liquidity exhibits weak significant results while Tobin-q and momentum risk-factors demonstrate statistically significant determinants for PSX. Furthermore, WLS regression produces robust coefficient results than OLS regression as except liquidity all the factors exhibit substantially improved results.
Practical Implications- The study findings would be useful for stocks and portfolio managers constructing optimal and diversified portfolios while investing in PSX.

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Copyright (c) 2023 Mohammad Azam

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This work is licensed under a Creative Commons Attribution 4.0 International License.

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Vol. 6 No. 1 (2023): SEISENSE Journal of Management View Issue

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2025-112026-10

Article history

  1. ReceivedMarch 12, 2023
  2. Published August 8, 2023

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