Title: An application of panel ARDL model with cointegration for portfolio management

Authors: Umer Ilyas; Matti Ullah Butt; Muhammad Gulzar

Addresses: National College of Business Administration and Economics, Lahore, 54660, Pakistan ' National College of Business Administration and Economics, FLC Campus, Lahore, Pakistan ' University of Management and Technology, Lahore, 54770, Pakistan

Abstract: The aims of this study are to explore the impact of macroeconomic variables on stock performance and to provide a knowledge platform with international applicability with the application of panel ARDL model with cointegration on Pakistan Stock Exchange (PSX) not only to have better development of portfolio but to overcome the deficiencies of conventional index base studies as well by finding this impact on not only every sector of PSX but upon each individual firm of the sector as well. For this purpose, monthly data for first quarter of 2005 until first quarter of 2020 was employed for exports, foreign direct investment, foreign exchange reserves, interest rate and inflation as independent variables and monthly stock prices as dependent variable. The results indicate that impact and response was significantly different for overall sector as compared to firms from within same sector for change in independent variables. This opens a new dimension of knowledge for portfolio managers.

Keywords: portfolio; sectorial analysis; macroeconomic variables; MEVs; stock market performance; SMP; panel ARDL model.

DOI: 10.1504/IJEBR.2022.122051

International Journal of Economics and Business Research, 2022 Vol.23 No.3, pp.275 - 298

Received: 14 Aug 2020
Accepted: 15 Oct 2020

Published online: 08 Apr 2022 *

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