Size premium, value premium and market timing: evidence from an emerging economy


  • Syed Haroon Rashid Business School, National University of Science and Technology, Islamabad, Pakistan
  • Mohsin Sadaqat Business School, National University of Science and Technology, Islamabad, Pakistan
  • Khalil Jebran School of Accounting, Dongbei University of Finance and Economics, Dalian, China
  • Zulfiqar Ali Memon School of Accounting, Dongbei University of Finance and Economics, Dalian, China


Pakistan, Emerging market, Market timing, CAPM, Size premium, Value premium


Purpose. This study aims to investigate the market timing strategy in different market conditions (i.e. up, down, normal and in-financial-crisis situation) in the emerging market of Pakistan over the period 1995 to 2015. Furthermore, this study tests the validity of the capital asset pricing model (CAPM) and Fama and French model.

Design/methodology/approach. This study considers monthly stock returns of 167 firms and constructs six different portfolios on the basis of different size and book to market ratio. The Treynor and Mazuy model is used to capture the market timing strategy.

Findings. The results indicate evidence of the market timing in normal market conditions. However, there is less supportive evidence of market timing in up-market, down-market and in-financial-crisis situations. This study also confirms the validity of the capital asset pricing model and Fama and French three-factor model with strong support of value premium and size premium in the stock market.

Practical implications. The findings of this study are helpful to companies in estimating the cost of issuing equity more accurately. The investors can use market timing to make their investment in a more better and profitable manner.

Originality/value. Unlike other previous studies, this study considers an extended period to test the validity of the capital asset pricing model and Fama and French model. In addition, this study is novel in testing the marketing timing of the firms in the context of emerging economy of Pakistan.



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How to Cite

Rashid, S. H. ., Sadaqat, M. ., Jebran, K. ., & Ali Memon, Z. . (2018). Size premium, value premium and market timing: evidence from an emerging economy. Journal of Economics, Finance and Administrative Science, 23(46), 266–288. Retrieved from