Significance of Capital Asset Pricing Model: Gift University

GIFT UNIVERSITY
SIGNIFICANCE OF CAPITAL ASSET

PRICING MODEL
INVESTMENT IN PORTFOLIOS OF DIFFERENT SECURITIES EVALUATION PROCESS
ALLIED GROUP
5/25/2010
SIGNIFICANCE OF CAPITAL ASSET PRICING MODEL 2010
INVESTMENT ANALYSIS & PORTFOLIO MANAGEMENT

TOPIC: IMPLEMENTATION OF THEOERY IN CHECKING THE SIGNIFICANCE OF CAPITAL ASSET PRICING MODEL
TO:
MR. ASIM ILYAS
FROM:
M. MOBASHAR ALI 08117032

IMRAN KHAN 08117043
SALMAN-UL-MUSTAFA 08117044
MBA (Banking & Finance)

Section A
2
DEDICATION
We are thankful to ALLAH ALMIGHTY and His Prophet (SAW) and further thanks to our Teachers who make us able to make
this study possible. Guidance is provided by the Practitioner and analyst of market portfolios Mr. Ehsaan Ullah, who provide
guidance to put this study into practice by using Excel Sheets. Further efforts of Mr. Asim Ilyas are accountable, without which
we can’t come to this stage. Further our special thanks to our parents who financed us for a long time and for their positive
response to continue our studies.
3
1.ABSTRACT
This study is basically to put Capital Asset Pricing Model into practice. A market portfolio was made of 30 companies stock
indexed on the Karachi 100 index. It is tried to find out which assets are under or over priced in this study. Prices of the stocks
were taken for the last 60 months. The restriction on the selection of the companies is that, the companies must be listed in
Karachi Stock Exchange and in Karachi 100 index. This study summarizes calculation of excess mean, variance, co-variance,
standard deviation, of portfolio in which weights assigned are w1 is 30% and w2 is 70%. Throughout the study we are calculating
and describing what is happening and why is happening and also share the results about different steps involved in it.
4
2. INTRODUCTION
When MBA’s goes to the market, they only have bookish material but if they learn how to check the significance of the Capital
Asset Pricing Model, they can easily takeover market or in other words, market will accept the MBA’s, a view point of an
analyst. This action of putting theory into practice is very important from the view of the markets. In it you basically trying to
diversify unsystematic risk and at the same time maximizing returns. In this study Markowitz efficient frontier was also made.
The portfolio that was made consists of different companies in different sectors. Sectors named as textile sector, banking
sector, cement industry, tobacco industry, food industry, insurance sector, miscellaneous firms, sugar industry, power &
electricity sector, automobile industry, telecommunication sector, and oil & gas sector. Following table provide the names of
the companies in the above sectors.
TABLE 1.1 (NAMES OF THE COMPANIES)

CODE IN KSE NAME OF THE COMPANIES
ABL ALFLAH BANK LTD.

AGIL AGRIAUTOS INDUSTRY
ATHL ATLAS HONDA
COLG COLGATE PALMOLIVE
EFUL EFU LIFE INSURANCE
DGKC D.G.KHAN CEMENT
5
FCCL FAUJI CEMENT

FZTM FAZAL TEXTILE MILL LTD.
HABSM HABIB SUGAR MILL LTD.
HUBC HUB POWER CO.
ICI ICI PAKISTAN
IGIIL IGI INSURANCE
INDU INDUS MOTOR
JSBL JS BANK LTD.
KOHE KOHINOOR ENERGY
LAKST LAKSON TOBACCO
MCB MCB BANK LTD.
MTL MILAT TRACTORS LTD.
NBP NATIONAL BANK OF PAKISTAN
NRL NATIONAL REFINERY
NML NISHAT MILLS LTD.
OGDC OIL & GAS DEVELOPMENT
PSO P.S.O
PKGS PACKAGES LIMITED
6
PSMC PAK SUZUKI MOTORS

PAKT PAK TOBACCO
SHEL SHELL PAKISTAN
ULEVER UNILEVER PAKISTAN
NPL NESTLE PAKISTAN LIMITED
WTL WORLDCAL TELECOM LTD.
3. RESEARCH METHODOLOGY
We would like to explain that all the calculations are made in Excel Sheets in Microsoft Excel to ease out our selves from the
lengthy calculations otherwise than Excel Sheets. Firstly, 30 firms have been chosen from the Karachi 100 index and then
prices of the last 60 months were founded, which were required in order to calculate return matrix. Risk free rate is calculated
by taking the rate of 1 year treasury for the last dates. The portfolio that was made consists of different companies in different
sectors. Last 60 months were selected for the rational decision making on the basis of previous data or in other words, last 60
months data was chosen in order to minimize the chances of error. We are informed to take data from the business site named
as “www.brecorder.com” for the listed companies in KSE 100 index by the market analyst. A workshop was taken for the
purpose of entering data and calculating different matrix and portfolios, arranged in GIFT UNIVERSITY under the super vision
of MR. ASIM ILYAS, where lecturer was a market analyst and practitioner MR. EHSAAN-ULLAH. We also take the KSE 100
Index Returns closing for the comparison of the returns calculated, which are also closing of the months for the same site as
mentioned above for the prices of the 30 companies and same periods as for the 30 indexed companies. For the calculation of
7
RFR (Risk Free Rate), we comply to the SBP’s (State Bank of Pakistan) website for the “www.sbp.org.pk”, from the site we
found T-rates with different maturities and we only selected 1-year T-rates (Treasury rates) for the calculation of the Capital
Asset Pricing Model. After taking the T-rates we divide the sum of the T-rates to the number of the periods, in other words we
take average rate (10.1234% as calculated), and calculations requiring T-rates are shown in the following table.
TABLE 1.2
Auction No. Auction Date WAY (12-month) n
180 6-Jul-05 8.4561% 1
181 20-Jul-05 8.6884% 2
182 3-Aug-05 8.6986% 3
183 17-Aug-05 8.7865% 4
184 31-Aug-05 8.7830% 5
185 14-Sep-05 8.7907% 6
186 28-Sep-05 8.7896% 7
187 12-Oct-05 8.7907% 8
188 26-Oct-05 8.7687% 9
189 8-Nov-05 8.7674% 10
190 23-Nov-05 8.7666% 11
191 7-Dec-05 8.7874% 12
192 21-Dec-05 8.7648% 13
193 4-Jan-06 8.7768% 14
194 18-Jan-06 8.7523% 15
195 1-Feb-06 8.7843% 16
196 15-Feb-06 8.7907% 17
197 1-Mar-06 8.7808% 18
198 15-Mar-06 8.7832% 19
199 29-Mar-06 8.7897% 20
200 12-Apr-06 8.7878% 21
201 26-Apr-06 8.7907% 22
202 10-May-06 8.7907% 23
203 24-May-06 8.7907% 24
204 7-Jun-06 8.7863% 25
205 21-Jun-06 8.7907% 26
206 5-Jul-06 8.7903% 27
207 19-Jul-06 8.7865% 28
208 2-Aug-06 9.0046% 29
209 16-Aug-06 9.0046% 30
210 30-Aug-06 9.0046% 31
211 13-Sep-06 9.0046% 32
212 27-Sep-06 9.0046% 33
213 11-Oct-06 9.0046% 34
8
214 21-Oct-06 9.0046% 35
215 8-Nov-06 9.0020% 36
216 22-Nov-06 9.0046% 37
217 6-Dec-06 9.0046% 38
218 20-Dec-06 9.0046% 39
219 30-Dec-06 9.0046% 40
220 17-Jan-07 9.0046% 41
221 31-Jan-07 9.0043% 42
222 14-Feb-07 9.0045% 43
223 28-Feb-07 9.0046% 44
224 14-Mar-07 9.0031% 45
225 28-Mar-07 9.0156% 46
226 11-Apr-07 9.0538% 47
227 25-Apr-07 9.0784% 48
228 9-May-07 9.0910% 49
229 23-May-07 9.1021% 50
230 7-Jun-07 9.1243% 51
231 21-Jun-07 9.1597% 52
232 4-Jul-07 9.1597% 53
233 18-Jul-07 9.1593% 54
234 1-Aug-07 9.3727% 55
235 15-Aug-07 9.3975% 56
236 29-Aug-07 9.3990% 57
237 12-Sep-07 9.3990% 58
238 26-Sep-07 9.3990% 59
239 10-Oct-07 9.3990% 60
240 24-Oct-07 9.3990% 61
241 7-Nov-07 9.3932% 62
242 21-Nov-07 9.3961% 63
243 5-Dec-07 9.4058% 64
244 19-Dec-07 9.4429% 65
245 2-Jan-08 9.4371% 66
246 16-Jan-08 9.4493% 67
248 13-Feb-08 9.8692% 68
249 27-Feb-08 9.9908% 69
250 12-Mar-08 10.0777% 70
251 26-Mar-08 10.1235% 71
252 9-Apr-08 10.1251% 72
253 23-Apr-08 10.1357% 73
254 7-May-08 10.1715% 74
255 21-May-08 10.3246% 75
256 4-Jun-08 11.3931% 76
257 18-Jun-08 11.6881% 77
258 2-Jul-08 11.7841% 78
259 16-Jul-08 11.8294% 79
266 22-Oct-08 12.7873% 80
271 31-Dec-08 14.2529% 81
9
272 14-Jan-09 14.2609% 82
273 28-Jan-09 14.1589% 83
274 11-Feb-09 13.8408% 84
275 25-Feb-09 12.9881% 85
276 11-Mar-09 11.7781% 86
277 25-Mar-09 11.8475% 87
278 8-Apr-09 12.9687% 88
279 22-Apr-09 13.1351% 89
280 6-May-09 13.2294% 90
281 20-May-09 13.2648% 91
282 3-Jun-09 13.2297% 92
283 17-Jun-09 12.0882% 93
284 15-Jul-09 11.4703% 94
285 29-Jul-09 11.7514% 95
286 12-Aug-09 12.1620% 96
287 26-Aug-09 12.4204% 97
288 9-Sep-09 12.4628% 98
289 25-Sep-09 12.4751% 99
290 7-Oct-09 12.5804% 100
291 21-Oct-09 12.6091% 101
292 4-Nov-09 12.5202% 102
293 18-Nov-09 12.1916% 103
294 2-Dec-09 12.0903% 104
295 16-Dec-09 12.1913% 105
296 30-Dec-09 12.0905% 106
10.1234%
4. CALCULATIONS & FINDINGS

STEP 1
First matrix (table 1.3) shows the prices of the 30 companies’ stocks for the 61 months. December 2004 is taken just as to find
out the returns that the stocks are providing. Because the formula to calculate the returns is:
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TABLE 1.3
STOCK PRICES
PKGS AGIL ATHL COLG ULEVER EFUL PSMC FZTM HABSM NESTLE ICI IGIIL INDU LAKST KOHE SHEL MTL NBP RBS
Dec-04 198.85 54.40 220.00 275.20 1475.00 170.00 141.00 90.00 46.75 519.95 89.65 250.00 102.00 306.00 31.20 515.45 242.00 80.35 19.50
Jan-05 197.00 53.40 240.00 275.00 1483.00 159.00 140.00 106.25 43.00 510.00 91.95 246.00 101.50 300.00 28.60 547.50 242.20 95.85 20.05
Feb-05 173.00 58.70 250.00 264.00 1580.00 160.00 172.00 100.50 40.75 500.00 110.70 287.90 116.00 280.00 29.50 560.00 235.00 138.40 26.45
Mar-05 150.00 52.00 247.00 228.10 1500.00 168.00 148.00 91.00 33.25 502.00 95.35 280.00 120.00 228.00 26.50 501.60 219.00 115.90 21.75
Apr-05 145.00 52.00 287.90 215.00 1403.00 158.00 120.00 90.00 27.10 551.25 89.50 209.00 100.50 235.00 25.05 528.75 208.10 96.70 19.35
May-05 134.00 45.00 300.00 187.80 1401.00 150.00 109.00 82.00 27.50 535.00 73.40 203.00 83.50 224.00 22.50 502.00 200.00 92.20 17.50
Jun-05 140.00 50.00 305.00 194.25 1410.00 171.00 100.00 81.00 30.00 530.00 77.50 200.00 90.00 258.00 26.00 553.90 208.00 107.95 19.00
Jul-05 145.80 48.10 302.00 194.00 1498.00 161.75 106.00 88.00 30.75 538.65 78.10 232.00 100.00 238.00 22.50 561.00 200.00 105.65 20.10
Aug-05 148.00 45.00 288.00 188.00 1435.00 161.00 115.25 82.65 28.50 554.00 92.75 225.15 101.00 234.00 24.00 666.50 203.00 119.00 17.30
Sep-05 166.25 48.50 312.00 185.00 1450.00 155.00 151.00 76.00 30.50 559.00 94.25 242.00 133.00 245.00 23.75 600.00 339.60 145.45 20.50
Oct-05 153.55 47.00 200.00 215.00 1510.00 152.00 193.90 76.00 30.50 560.00 114.10 228.00 147.50 249.00 23.30 615.00 279.00 153.10 19.00
Nov-05 178.05 57.25 197.00 293.90 1600.00 146.95 185.25 122.55 33.80 641.50 133.95 237.00 165.00 311.50 24.45 610.00 288.00 181.40 23.90
Dec-05 202.00 62.50 198.05 260.00 1775.00 171.00 208.00 125.00 46.30 770.00 140.50 271.00 175.90 329.00 27.60 792.00 295.50 199.45 25.60
Jan-06 218.50 83.00 232.00 369.00 1966.00 170.00 288.95 178.90 37.60 820.00 144.20 299.95 222.00 310.00 27.35 771.95 323.00 254.90 27.30
Feb-06 216.80 89.05 207.55 306.00 1800.00 165.00 262.50 161.00 35.90 800.00 181.00 299.45 185.05 286.00 26.00 659.00 319.95 330.20 25.85
Mar-06 209.00 87.95 200.65 340.00 1830.00 209.95 258.00 149.90 39.25 825.00 157.90 320.00 187.25 294.00 26.20 595.00 300.00 282.50 22.10
Apr-06 211.00 80.00 199.00 335.00 1850.00 162.45 301.00 155.00 41.05 875.00 142.70 257.50 188.00 349.50 26.95 535.00 302.00 256.00 23.30
May-06 205.00 71.00 206.50 338.00 1875.00 169.50 295.00 137.75 38.00 1137.15 120.00 422.25 189.70 298.90 25.90 463.25 324.50 204.25 23.00
Jun-06 209.35 68.80 221.00 346.00 1900.00 194.00 313.00 140.00 37.00 1102.55 109.10 355.00 191.00 298.00 25.85 481.40 322.00 215.50 27.30
Jul-06 205.00 74.50 236.25 380.00 2000.00 212.00 346.05 135.00 35.80 1025.05 125.60 385.00 217.75 290.00 26.50 555.00 328.00 225.40 25.45
Aug-06 202.35 72.00 237.00 436.00 1940.00 206.00 374.90 134.00 37.00 919.65 115.80 378.00 218.25 300.50 25.50 613.75 351.10 224.10 40.50
Sep-06 200.55 84.40 158.00 330.00 2020.00 210.00 402.45 122.00 39.00 910.00 116.00 364.00 205.25 300.00 25.80 471.00 340.00 253.25 48.10
Oct-06 198.00 82.70 145.50 335.00 2000.00 230.00 418.50 115.00 38.05 890.05 119.90 383.00 202.00 330.00 27.00 421.00 290.00 285.00 55.95
Nov-06 207.30 77.00 119.50 367.00 2000.00 240.95 410.00 108.00 39.50 900.05 118.00 385.00 201.90 350.00 26.35 406.50 289.00 272.10 53.50
Dec-06 204.00 76.00 120.80 440.00 2000.00 231.00 439.95 91.55 43.10 1000.00 115.60 399.00 195.95 365.00 24.90 399.00 275.00 224.50 46.25
Jan-07 207.90 86.00 120.00 452.00 2200.00 258.00 445.00 84.40 32.00 1323.00 128.75 397.00 211.00 642.80 26.95 411.60 294.00 279.30 50.50
Feb-07 218.00 78.00 115.10 390.00 2100.00 298.00 476.00 104.10 28.30 1460.00 129.25 445.00 216.00 654.00 26.00 379.00 286.10 269.00 52.75
Mar-07 224.00 77.00 121.00 400.00 2100.00 298.50 519.95 115.00 26.95 1680.00 141.50 433.00 240.10 640.00 25.00 390.00 275.00 229.35 52.50
Apr-07 232.00 92.40 130.65 410.00 2110.00 176.00 374.05 150.00 31.00 1650.00 149.20 300.95 292.20 565.25 30.75 388.10 300.25 248.85 57.60
May-07 274.00 92.60 131.30 424.00 2199.90 188.00 367.50 248.00 35.65 1499.00 167.10 314.05 284.95 575.00 36.10 406.00 342.45 253.30 53.90
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STOCK PRICES
NML HUBC OGDC PSO ABL FCCL PAKT NRL MCB SIEM DGKC KSE 100
77.40 32.10 74.95 286.75 38.55 15.95 61.50 303.70 58.70 595.00 54.75 6218.40
94.90 31.80 81.00 310.60 42.80 15.20 65.00 304.25 65.50 623.00 56.95 6747.39
109.95 33.50 117.55 412.45 53.15 17.75 62.50 430.00 78.40 651.00 66.50 8260.06
86.90 31.45 111.55 398.00 45.30 15.60 57.00 400.90 64.00 619.00 59.95 7770.33
82.25 28.45 95.60 368.00 42.55 14.50 57.00 360.00 75.35 580.00 60.50 7104.65
66.00 26.15 92.65 359.00 36.50 11.50 52.35 358.30 67.90 660.00 51.50 6857.67
76.00 26.40 105.30 386.00 40.75 12.80 64.00 316.30 79.30 685.00 55.75 7450.12
74.90 26.55 101.75 373.35 45.50 12.60 52.25 315.10 86.50 610.00 55.50 7178.93
80.60 27.60 114.25 390.30 43.85 14.20 67.00 353.85 104.50 666.00 62.15 7796.86
94.50 29.30 114.00 385.00 49.50 16.55 68.00 361.00 126.30 671.00 77.50 8225.66
88.40 23.20 104.70 410.00 50.60 19.60 64.00 374.00 146.80 669.00 92.65 8247.34
104.00 24.00 109.75 416.50 68.30 26.35 74.40 376.75 156.30 889.00 108.75 9025.93
113.50 24.00 118.00 416.85 73.75 23.00 68.95 361.75 167.80 875.00 106.60 9556.61
132.90 25.35 126.10 403.55 85.45 24.00 75.05 381.00 209.75 1055.00 127.00 10524.16
137.05 24.70 146.90 430.00 80.30 24.90 68.00 373.00 261.00 1195.00 147.10 11456.27
139.00 23.00 157.60 373.00 59.00 25.35 63.50 342.90 225.05 1335.00 151.10 11485.90
122.05 22.35 156.90 342.00 53.50 23.10 71.30 302.75 238.40 1365.00 110.05 11342.17
97.00 20.45 128.60 304.00 41.60 19.25 68.00 260.00 198.00 1300.00 90.75 9800.69
104.80 23.00 136.75 309.00 40.00 19.20 68.35 267.00 210.30 1180.00 90.00 9989.41
95.40 24.30 143.70 364.65 38.00 23.05 68.70 261.50 222.75 1101.00 96.65 10497.63
81.45 26.60 129.00 328.00 37.00 20.70 68.50 281.00 214.35 1000.00 92.50 10064.13
89.25 26.00 127.85 312.05 46.25 21.30 64.50 277.00 255.00 980.00 96.00 10512.48
84.25 25.60 148.70 300.00 50.45 19.50 72.15 269.25 274.50 1000.00 85.00 11327.71
87.90 28.25 127.20 304.00 48.55 15.95 67.45 276.60 255.00 1030.00 70.00 10618.75
87.85 27.60 115.55 291.60 41.60 15.10 72.00 258.00 247.00 1100.00 64.10 10058.46
103.50 31.90 124.50 339.90 46.85 15.75 83.00 266.00 297.95 1295.00 72.95 11272.33
98.50 31.55 119.25 355.30 51.70 16.25 77.70 247.50 293.00 1140.00 80.65 11179.97
100.60 28.95 118.80 355.05 45.75 16.60 80.50 240.20 270.65 1010.00 86.50 11271.59
114.10 33.60 122.95 360.50 59.30 20.20 103.95 304.00 298.00 1233.65 101.70 12369.70
128.70 34.70 122.45 370.00 54.90 19.05 152.55 338.50 340.95 1680.00 105.70 12961.26
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CONTINUED TABLE 1.3
Jun-07 319.05 98.90 158.00 470.00 2235.00 270.00 392.00 278.50 35.55 1545.00 159.95 400.00 305.50 575.00 37.50 410.05 331.50 262.00 52.00
Jul-07 299.45 102.00 162.55 487.50 2360.00 300.00 403.10 309.75 36.80 1510.00 153.00 357.00 306.00 570.00 36.50 467.85 330.00 261.00 56.00
Aug-07 264.85 92.00 159.00 530.00 2250.00 333.00 372.00 373.00 35.00 1490.00 156.45 332.00 291.75 551.50 32.00 385.00 315.50 230.00 46.20
Sep-07 350.00 96.00 148.00 479.00 2460.00 398.50 385.80 358.00 46.70 1500.00 221.00 340.50 330.00 584.05 36.90 413.95 302.00 244.00 54.35
Oct-07 373.50 138.00 160.00 550.00 2549.00 463.75 384.75 394.00 54.00 1530.00 215.20 395.90 385.70 575.95 34.40 443.00 282.50 249.00 52.00
Nov-07 381.00 111.15 174.55 799.00 2450.00 445.00 370.75 400.00 55.00 1835.00 196.65 390.50 365.00 510.00 34.00 439.05 281.00 244.00 48.10
Dec-07 363.80 108.25 222.95 759.05 2280.05 618.85 329.65 398.95 53.65 1800.00 187.25 414.05 319.20 457.00 31.80 406.30 270.50 232.15 47.95
Jan-08 368.50 98.70 201.10 735.00 2350.00 523.50 280.60 404.00 38.00 1690.90 197.95 357.00 285.90 458.00 33.00 447.00 271.40 226.70 45.40
Feb-08 368.00 84.00 205.00 715.00 2350.00 700.00 277.00 419.00 50.00 1600.00 200.50 410.00 300.00 437.00 32.20 482.00 287.00 265.55 45.00
Mar-08 377.25 82.95 196.00 565.00 2350.00 558.60 255.00 509.00 51.90 1590.00 202.39 319.95 285.00 360.00 30.85 472.85 297.00 233.00 36.50
Apr-08 337.50 86.00 228.90 632.00 2459.99 492.00 216.99 579.99 56.00 1500.00 163.00 306.50 334.90 396.00 30.70 476.00 292.50 225.05 33.00
May-08 227.80 88.00 201.90 622.00 2467.00 370.00 155.95 708.99 48.50 1282.51 161.37 206.00 240.07 305.00 31.50 415.00 265.25 157.90 27.00
Jun-08 251.89 82.75 210.00 624.79 2350.00 381.26 119.79 786.00 44.35 1640.00 152.00 225.72 200.50 350.00 27.15 417.00 266.00 147.50 24.07
Jul-08 204.02 56.53 188.00 680.00 2290.00 331.00 100.23 786.00 38.55 1464.41 130.80 180.00 167.01 388.00 25.00 361.00 236.01 119.74 20.21
Aug-08 141.74 45.30 184.99 650.00 2360.00 356.75 83.79 786.00 34.20 1350.00 126.99 165.25 149.85 343.67 25.00 409.30 224.90 93.02 31.60
Sep-08 141.74 44.20 184.99 650.00 2340.00 356.75 83.79 778.14 34.20 1350.00 126.99 115.27 143.30 343.67 25.00 310.31 229.00 93.02 28.67
Oct-08 141.74 36.00 178.49 512.00 2340.00 356.75 83.79 776.64 34.20 1342.50 126.99 115.27 143.30 343.67 22.57 310.31 163.92 93.02 28.67
Nov-08 142.17 36.00 178.49 512.00 2340.00 356.75 83.79 776.64 34.20 1333.50 126.99 115.27 143.30 343.67 21.57 310.31 163.92 93.30 24.64
Dec-08 81.19 30.87 178.49 512.00 1807.71 356.75 79.61 776.64 30.23 1333.50 68.71 115.27 122.88 343.67 19.25 310.31 133.91 50.32 21.13
Jan-09 116.69 18.11 169.57 650.00 2006.00 183.18 48.90 778.14 22.93 1086.16 60.25 60.59 63.13 326.49 19.25 171.93 169.83 56.57 10.98
Feb-09 123.38 21.20 153.05 650.00 1789.50 121.00 53.27 778.14 23.01 870.00 70.48 55.99 61.53 310.17 20.24 190.83 189.28 67.51 9.85
Mar-09 173.09 27.96 88.80 261.74 1900.00 111.61 54.53 424.08 23.06 1175.90 96.18 64.77 73.85 167.21 25.50 243.57 179.42 88.10 10.78
Apr-09 145.37 33.00 61.76 290.00 1950.58 115.77 65.67 402.00 27.11 1000.00 126.15 98.84 127.79 193.00 27.00 223.51 254.64 75.55 26.11
May-09 159.24 33.15 111.20 294.00 2000.00 125.98 65.52 395.00 25.83 950.25 144.56 95.28 126.16 180.01 27.80 226.70 292.00 71.22 19.25
Jun-09 157.04 32.64 94.23 280.00 1950.11 99.94 67.90 355.00 25.80 1091.98 140.25 90.34 107.72 167.02 29.00 223.90 279.24 67.03 16.95
Jul-09 170.58 41.95 90.00 313.83 2127.49 119.19 97.53 350.71 29.61 1100.00 148.46 85.90 169.94 167.99 30.04 230.29 294.00 68.95 15.24
Aug-09 159.48 46.06 90.01 292.08 2258.31 110.62 80.79 429.24 34.00 1097.80 158.72 79.06 144.84 170.90 32.80 257.06 307.57 70.20 20.48
Sep-09 162.59 57.25 100.54 282.25 2283.60 122.71 87.04 480.00 34.84 1199.97 178.83 91.59 175.24 187.80 33.35 265.05 399.61 83.47 20.01
Oct-09 152.90 64.00 121.00 387.11 2375.00 146.22 86.07 470.00 32.50 1200.04 175.17 104.93 186.22 209.34 32.50 250.05 355.06 82.28 20.05
Nov-09 143.40 63.12 118.49 352.01 2300.50 127.31 93.17 399.00 31.57 1200.01 163.67 102.99 217.76 284.26 32.30 246.96 336.02 72.69 18.81
Dec-09 144.00 60.25 138.83 351.00 2300.00 137.50 88.96 420.00 39.87 1245.96 168.49 87.89 196.52 266.76 31.00 250.36 379.80 74.37 18.00
13
130.45 36.70 119.80 391.45 65.10 19.70 157.00 341.00 365.00 1735.00 116.50 13772.46
128.05 36.60 122.60 375.50 55.85 20.80 158.00 440.00 324.60 1769.00 109.70 13738.87
97.25 29.45 105.90 329.00 45.00 17.60 132.00 430.00 311.50 1527.00 93.00 12214.26
116.80 33.60 115.00 360.55 49.50 18.35 160.00 387.55 333.00 1689.00 110.00 13351.79
115.20 33.10 128.20 407.20 56.00 18.15 164.00 384.00 380.10 2000.00 101.00 14319.42
113.35 30.20 120.90 429.75 52.85 15.70 156.00 386.00 372.30 1700.00 99.80 13998.52
105.20 30.50 119.45 406.60 53.70 14.90 155.50 361.00 399.95 1699.00 94.70 14075.83
99.60 31.45 119.85 438.30 53.30 15.80 154.50 377.80 388.50 1539.00 93.45 14017.01
116.15 32.70 129.00 496.00 61.75 16.00 148.00 353.00 435.00 1549.00 107.80 14934.30
107.45 31.95 133.90 533.45 54.05 14.90 140.00 337.50 415.50 1520.00 113.00 15125.29
131.00 32.00 134.00 503.00 55.08 13.25 155.00 365.30 415.00 1650.00 109.20 15122.47
84.00 31.61 123.70 440.00 45.15 10.50 132.00 269.00 274.41 1574.00 72.60 12130.51
85.97 28.60 124.36 417.24 41.06 10.12 117.00 297.47 326.38 1405.80 67.14 12289.03
64.00 25.99 115.30 373.35 38.00 7.69 128.00 245.00 271.00 1350.00 54.24 10583.58
46.81 21.56 97.93 279.99 31.32 6.98 118.85 196.03 243.60 1209.35 39.28 9208.26
46.71 21.46 94.43 279.99 31.25 6.90 113.89 196.03 335.75 1209.35 39.28 9179.68
46.71 21.46 94.43 267.49 31.25 6.90 113.89 176.03 335.75 1210.00 39.28 9182.88
37.81 21.46 94.43 267.49 31.25 6.90 111.89 176.03 223.75 1190.00 39.28 9187.10
22.60 14.09 49.99 144.58 16.73 4.70 106.30 95.16 125.81 1130.50 21.27 5865.01
26.36 16.10 45.97 121.42 13.89 5.54 59.79 106.77 94.50 941.00 14.51 5377.42
23.65 17.48 55.35 141.37 11.73 5.38 61.16 109.26 126.81 941.00 16.12 5727.46
30.32 20.62 72.07 195.94 14.01 6.26 69.29 161.46 141.20 750.00 21.81 6860.22
33.03 26.40 73.79 197.84 12.28 6.60 71.00 186.91 161.78 800.00 23.77 7202.10
37.21 26.02 78.15 110.11 12.00 6.56 72.19 201.70 161.64 969.00 26.70 7276.61
37.82 27.09 78.64 213.65 10.55 6.59 72.85 220.02 155.03 1018.00 29.65 7162.18
40.12 29.66 86.94 238.04 11.23 8.42 84.19 220.39 160.92 1076.63 36.35 7720.93
44.43 32.97 107.92 289.32 11.92 7.75 109.85 227.79 204.91 1050.40 33.56 8675.67
66.51 31.39 107.38 313.11 12.57 7.80 106.96 230.03 221.08 1414.50 34.48 9349.68
60.38 29.03 103.61 304.63 13.53 6.86 108.50 194.85 213.20 1423.15 29.04 9159.18
66.51 30.12 106.39 298.35 14.09 6.13 104.00 185.13 215.12 1350.90 28.14 9206.21
69.90 31.08 110.61 297.44 13.73 6.16 105.00 176.82 219.68 1260.86 32.56 9386.92
14
STEP 2
Second matrix (table 1.4) named as RETURN MATRIX that is calculated after the presentation of the prices of the 61 months
and after implementation of the formula as followings:
After the implementation of the formula we are able to calculate the average (mean) of the returns by the following formula:
15
TABLE 1.4
RETURNS
PKGS AGIL ATHL COLG ULEVER EFUL PSMC FZTM HABSM NESTLE ICI IGIIL INDU LAKST
Jan-05 -0.0093035 -0.0184 0.09091 -0.00073 0.005423729 -0.06471 -0.00709 0.180556 -0.0802139 -0.0191365 0.026 -0.016 -0.0049 -0.0196078
Feb-05 -0.1218274 0.0993 0.04167 -0.04 0.065407957 0.006289 0.22857 -0.05412 -0.05232558 -0.0196078 0.204 0.17033 0.142857 -0.0666667
Mar-05 -0.132948 -0.1141 -0.012 -0.13598 -0.050632911 0.05 -0.13953 -0.09453 -0.18404908 0.004 -0.139 -0.0274 0.034483 -0.1857143
Apr-05 -0.0333333 0 0.16559 -0.05743 -0.064666667 -0.05952 -0.18919 -0.01099 -0.18496241 0.09810757 -0.061 -0.2536 -0.1625 0.03070175
May-05 -0.0758621 -0.1346 0.04203 -0.12651 -0.001425517 -0.05063 -0.09167 -0.08889 0.01476015 -0.0294785 -0.18 -0.0287 -0.16915 -0.0468085
Jun-05 0.0447761 0.1111 0.01667 0.03435 0.006423983 0.14 -0.08257 -0.0122 0.09090909 -0.0093458 0.056 -0.0148 0.077844 0.15178571
Jul-05 0.0414286 -0.038 -0.0098 -0.00129 0.062411348 -0.05409 0.06 0.08642 0.025 0.01632075 0.008 0.16 0.111111 -0.0775194
Aug-05 0.0150892 -0.0644 -0.0464 -0.03093 -0.042056075 -0.00464 0.08726 -0.0608 -0.07317073 0.02849717 0.188 -0.0295 0.01 -0.0168067
Sep-05 0.1233108 0.0778 0.08333 -0.01596 0.010452962 -0.03727 0.3102 -0.08046 0.07017544 0.00902527 0.016 0.07484 0.316832 0.04700855
Oct-05 -0.076391 -0.0309 -0.359 0.16216 0.04137931 -0.01935 0.28411 0 0 0.00178891 0.211 -0.0579 0.109023 0.01632653
Nov-05 0.1595571 0.2181 -0.015 0.36698 0.059602649 -0.03322 -0.04461 0.6125 0.10819672 0.14553571 0.174 0.03947 0.118644 0.25100402
Dec-05 0.1345128 0.0917 0.00533 -0.11535 0.109375 0.163661 0.12281 0.019992 0.36982249 0.20031177 0.049 0.14346 0.066061 0.05617978
Jan-06 0.0816832 0.328 0.17142 0.41923 0.107605634 -0.00585 0.38918 0.4312 -0.18790497 0.06493506 0.026 0.10683 0.262081 -0.0577508
Feb-06 -0.0077803 0.0729 -0.1054 -0.17073 -0.084435402 -0.02941 -0.09154 -0.10006 -0.04521277 -0.0243902 0.255 -0.0017 -0.16644 -0.0774194
Mar-06 -0.0359779 -0.0124 -0.0332 0.11111 0.016666667 0.272424 -0.01714 -0.06894 0.09331476 0.03125 -0.128 0.06863 0.011889 0.02797203
Apr-06 0.0095694 -0.0904 -0.0082 -0.01471 0.010928962 -0.22624 0.16667 0.034023 0.04585987 0.06060606 -0.096 -0.1953 0.004005 0.18877551
May-06 -0.028436 -0.1125 0.03769 0.00896 0.013513514 0.043398 -0.01993 -0.11129 -0.07429963 0.2996 -0.159 0.63981 0.009043 -0.1447783
Jun-06 0.0212195 -0.031 0.07022 0.02367 0.013333333 0.144543 0.06102 0.016334 -0.02631579 -0.0304269 -0.091 -0.1593 0.006853 -0.003011
Jul-06 -0.0207786 0.0828 0.069 0.09827 0.052631579 0.092784 0.10559 -0.03571 -0.03243243 -0.0702916 0.151 0.08451 0.140052 -0.0268456
Aug-06 -0.0129268 -0.0336 0.00317 0.14737 -0.03 -0.0283 0.08337 -0.00741 0.03351955 -0.1028243 -0.078 -0.0182 0.002296 0.0362069
Sep-06 -0.0088955 0.1722 -0.3333 -0.24312 0.041237113 0.019417 0.07349 -0.08955 0.05405405 -0.0104931 0.002 -0.037 -0.05956 -0.0016639
Oct-06 -0.012715 -0.0201 -0.0791 0.01515 -0.00990099 0.095238 0.03988 -0.05738 -0.02435897 -0.0219231 0.034 0.0522 -0.01583 0.1
Nov-06 0.0469697 -0.0689 -0.1787 0.09552 0 0.047609 -0.02031 -0.06087 0.03810775 0.01123532 -0.016 0.00522 -0.0005 0.06060606
Dec-06 -0.015919 -0.013 0.01088 0.19891 0 -0.04129 0.07305 -0.15231 0.09113924 0.11104939 -0.02 0.03636 -0.02947 0.04285714
Jan-07 0.0191176 0.1316 -0.0066 0.02727 0.1 0.116883 0.01148 -0.0781 -0.2575406 0.323 0.114 -0.005 0.076805 0.76109589
Feb-07 0.048581 -0.093 -0.0408 -0.13717 -0.045454545 0.155039 0.06966 0.233412 -0.115625 0.10355253 0.004 0.12091 0.023697 0.01742377
Mar-07 0.0275229 -0.0128 0.05126 0.02564 0 0.001678 0.09233 0.104707 -0.04770318 0.15068493 0.095 -0.027 0.111574 -0.0214067
Apr-07 0.0357143 0.2 0.07975 0.025 0.004761905 -0.41039 -0.2806 0.304348 0.15027829 -0.0178571 0.054 -0.305 0.216993 -0.1167969
May-07 0.1810345 0.0022 0.00498 0.03415 0.042606635 0.068182 -0.01751 0.653333 0.15 -0.0915152 0.12 0.04353 -0.02481 0.017249
Jun-07 0.1644161 0.068 0.20335 0.10849 0.015955271 0.43617 0.06667 0.122984 -0.00280505 0.03068712 -0.043 0.27368 0.072118 0
Jul-07 -0.0614324 0.0313 0.0288 0.03723 0.055928412 0.111111 0.02832 0.112208 0.03516174 -0.0226537 -0.043 -0.1075 0.001637 -0.0086957
Aug-07 -0.1155 -0.0980 -0.0218 0.0872 -0.0466 0.1100 -0.0772 0.2042 -0.0489 -0.0132 0.0225 -0.0700 -0.0466 -0.0325
Sep-07 0.3215 0.0435 -0.0692 -0.0962 0.0933 0.1967 0.0371 -0.0402 0.3343 0.0067 0.4126 0.0256 0.1311 0.0590
Oct-07 0.0671 0.4375 0.0811 0.1482 0.0362 0.1637 -0.0027 0.1006 0.1563 0.0200 -0.0262 0.1627 0.1688 -0.0139
Nov-07 0.0201 -0.1946 0.0909 0.4527 -0.0388 -0.0404 -0.0364 0.0152 0.0185 0.1993 -0.0862 -0.0136 -0.0537 -0.1145
Dec-07 -0.0451 -0.0261 0.2773 -0.0500 -0.0694 0.3907 -0.1109 -0.0026 -0.0245 -0.0191 -0.0478 0.0603 -0.1255 -0.1039
Jan-08 0.0129 -0.0882 -0.0980 -0.0317 0.0307 -0.1541 -0.1488 0.0127 -0.2917 -0.0606 0.0571 -0.1378 -0.1043 0.0022
Feb-08 -0.0014 -0.1489 0.0194 -0.0272 0.0000 0.3372 -0.0128 0.0371 0.3158 -0.0538 0.0129 0.1485 0.0493 -0.0459
Mar-08 0.0251 -0.0125 -0.0439 -0.2098 0.0000 -0.2020 -0.0794 0.2148 0.0380 -0.0063 0.0094 -0.2196 -0.0500 -0.1762
Apr-08 -0.1054 0.0368 0.1679 0.1186 0.0468 -0.1192 -0.1491 0.1395 0.0790 -0.0566 -0.1946 -0.0420 0.1751 0.1000
May-08 -0.3250 0.0233 -0.1180 -0.0158 0.0028 -0.2480 -0.2813 0.2224 -0.1339 -0.1450 -0.0100 -0.3279 -0.2832 -0.2298
Jun-08 0.1058 -0.0597 0.0401 0.0045 -0.0474 0.0304 -0.2319 0.1086 -0.0856 0.2787 -0.0581 0.0957 -0.1648 0.1475
Jul-08 -0.1900 -0.3169 -0.1048 0.0884 -0.0255 -0.1318 -0.1633 0.0000 -0.1308 -0.1071 -0.1395 -0.2026 -0.1670 0.1086
Aug-08 -0.3053 -0.1987 -0.0160 -0.0441 0.0306 0.0778 -0.1640 0.0000 -0.1128 -0.0781 -0.0291 -0.0819 -0.1027 -0.1143
16
MATRIX
KOHE SHEL MTL NBP RBS NML HUBC OGDC PSO ABL FCCL PAKT NRL MCB SIEM DGKC KSE 100
-0.0833 0.0622 0.0008 0.1929 0.0282 0.2261 -0.0093 0.0807 0.0832 0.1102 -0.0470 0.0569 0.0018 0.1158 0.0471 0.0402 0.0851
0.0315 0.0228 -0.0297 0.4439 0.3192 0.1586 0.0535 0.4512 0.3279 0.2418 0.1678 -0.0385 0.4133 0.1969 0.0449 0.1677 0.2242
-0.1017 -0.1043 -0.0681 -0.1626 -0.1777 -0.2096 -0.0612 -0.0510 -0.0350 -0.1477 -0.1211 -0.0880 -0.0677 -0.1837 -0.0492 -0.0985 -0.0593
-0.0547 0.0541 -0.0498 -0.1657 -0.1103 -0.0535 -0.0953 -0.1430 -0.0754 -0.0607 -0.0705 0.0000 -0.1020 0.1773 -0.0630 0.0092 -0.0857
-0.1018 -0.0506 -0.0389 -0.0465 -0.0956 -0.1976 -0.0809 -0.0309 -0.0245 -0.1422 -0.2069 -0.0816 -0.0047 -0.0989 0.1379 -0.1488 -0.0348
0.1556 0.1034 0.0400 0.1708 0.0857 0.1515 0.0096 0.1365 0.0752 0.1164 0.1130 0.2225 -0.1172 0.1679 0.0379 0.0825 0.0864
-0.1346 0.0128 -0.0385 -0.0213 0.0579 -0.0145 0.0057 -0.0337 -0.0328 0.1166 -0.0156 -0.1836 -0.0038 0.0908 -0.1095 -0.0045 -0.0364
0.0667 0.1881 0.0150 0.1264 -0.1393 0.0761 0.0395 0.1229 0.0454 -0.0363 0.1270 0.2823 0.1230 0.2081 0.0918 0.1198 0.0861
-0.0104 -0.0998 0.6729 0.2223 0.1850 0.1725 0.0616 -0.0022 -0.0136 0.1288 0.1655 0.0149 0.0202 0.2086 0.0075 0.2470 0.0550
-0.0189 0.0250 -0.1784 0.0526 -0.0732 -0.0646 -0.2082 -0.0816 0.0649 0.0222 0.1843 -0.0588 0.0360 0.1623 -0.0030 0.1955 0.0026
0.0494 -0.0081 0.0323 0.1848 0.2579 0.1765 0.0345 0.0482 0.0159 0.3498 0.3444 0.1625 0.0074 0.0647 0.3288 0.1738 0.0944
0.1288 0.2984 0.0260 0.0995 0.0711 0.0913 0.0000 0.0752 0.0008 0.0798 -0.1271 -0.0733 -0.0398 0.0736 -0.0157 -0.0198 0.0588
-0.0091 -0.0253 0.0931 0.2780 0.0664 0.1709 0.0563 0.0686 -0.0319 0.1586 0.0435 0.0885 0.0532 0.2500 0.2057 0.1914 0.1012
-0.0494 -0.1463 -0.0094 0.2954 -0.0531 0.0312 -0.0256 0.1649 0.0655 -0.0603 0.0375 -0.0939 -0.0210 0.2443 0.1327 0.1583 0.0886
0.0077 -0.0971 -0.0624 -0.1445 -0.1451 0.0142 -0.0688 0.0728 -0.1326 -0.2653 0.0181 -0.0662 -0.0807 -0.1377 0.1172 0.0272 0.0026
0.0286 -0.1008 0.0067 -0.0938 0.0543 -0.1219 -0.0283 -0.0044 -0.0831 -0.0932 -0.0888 0.1228 -0.1171 0.0593 0.0225 -0.2717 -0.0125
-0.0390 -0.1341 0.0745 -0.2021 -0.0129 -0.2052 -0.0850 -0.1804 -0.1111 -0.2224 -0.1667 -0.0463 -0.1412 -0.1695 -0.0476 -0.1754 -0.1359
-0.0019 0.0392 -0.0077 0.0551 0.1870 0.0804 0.1247 0.0634 0.0164 -0.0385 -0.0026 0.0051 0.0269 0.0621 -0.0923 -0.0083 0.0193
0.0251 0.1529 0.0186 0.0459 -0.0678 -0.0897 0.0565 0.0508 0.1801 -0.0500 0.2005 0.0051 -0.0206 0.0592 -0.0669 0.0739 0.0509
-0.0377 0.1059 0.0704 -0.0058 0.5914 -0.1462 0.0947 -0.1023 -0.1005 -0.0263 -0.1020 -0.0029 0.0746 -0.0377 -0.0917 -0.0429 -0.0413
0.0118 -0.2326 -0.0316 0.1301 0.1877 0.0958 -0.0226 -0.0089 -0.0486 0.2500 0.0290 -0.0584 -0.0142 0.1896 -0.0200 0.0378 0.0445
0.0465 -0.1062 -0.1471 0.1254 0.1632 -0.0560 -0.0154 0.1631 -0.0386 0.0908 -0.0845 0.1186 -0.0280 0.0765 0.0204 -0.1146 0.0775
-0.0241 -0.0344 -0.0034 -0.0453 -0.0438 0.0433 0.1035 -0.1446 0.0133 -0.0377 -0.1821 -0.0651 0.0273 -0.0710 0.0300 -0.1765 -0.0626
-0.0550 -0.0185 -0.0484 -0.1749 -0.1355 -0.0006 -0.0230 -0.0916 -0.0408 -0.1432 -0.0533 0.0675 -0.0672 -0.0314 0.0680 -0.0843 -0.0528
0.0823 0.0316 0.0691 0.2441 0.0919 0.1781 0.1558 0.0775 0.1656 0.1262 0.0430 0.1528 0.0310 0.2063 0.1773 0.1381 0.1207
-0.0353 -0.0792 -0.0269 -0.0369 0.0446 -0.0483 -0.0110 -0.0422 0.0453 0.1035 0.0317 -0.0639 -0.0695 -0.0166 -0.1197 0.1056 -0.0082
-0.0385 0.0290 -0.0388 -0.1474 -0.0047 0.0213 -0.0824 -0.0038 -0.0007 -0.1151 0.0215 0.0360 -0.0295 -0.0763 -0.1140 0.0725 0.0082
0.2300 -0.0049 0.0918 0.0850 0.0971 0.1342 0.1606 0.0349 0.0153 0.2962 0.2169 0.2913 0.2656 0.1011 0.2214 0.1757 0.0974
0.1740 0.0461 0.1405 0.0179 -0.0642 0.1280 0.0327 -0.0041 0.0264 -0.0742 -0.0569 0.4675 0.1135 0.1441 0.3618 0.0393 0.0478
0.0388 0.0100 -0.0320 0.0343 -0.0353 0.0136 0.0576 -0.0216 0.0580 0.1858 0.0341 0.0292 0.0074 0.0705 0.0327 0.1022 0.0626
-0.0267 0.1410 -0.0045 -0.0038 0.0769 -0.0184 -0.0027 0.0234 -0.0407 -0.1421 0.0558 0.0064 0.2903 -0.1107 0.0196 -0.0584 -0.0024
-0.1233 -0.1771 -0.0439 -0.1188 -0.1750 -0.2405 -0.1954 -0.1362 -0.1238 -0.1943 -0.1538 -0.1646 -0.0227 -0.0404 -0.1368 -0.1522 -0.1110
0.1531 0.0752 -0.0428 0.0609 0.1764 0.2010 0.1409 0.0859 0.0959 0.1000 0.0426 0.2121 -0.0987 0.0690 0.1061 0.1828 0.0931
-0.0678 0.0702 -0.0646 0.0205 -0.0432 -0.0137 -0.0149 0.1148 0.1294 0.1313 -0.0109 0.0250 -0.0092 0.1414 0.1841 -0.0818 0.0725
-0.0116 -0.0089 -0.0053 -0.0201 -0.0750 -0.0161 -0.0876 -0.0569 0.0554 -0.0563 -0.1350 -0.0488 0.0052 -0.0205 -0.1500 -0.0119 -0.0224
-0.0647 -0.0746 -0.0374 -0.0486 -0.0031 -0.0719 0.0099 -0.0120 -0.0539 0.0161 -0.0510 -0.0032 -0.0648 0.0743 -0.0006 -0.0511 0.0055
0.0377 0.1002 0.0033 -0.0235 -0.0532 -0.0532 0.0311 0.0033 0.0780 -0.0074 0.0604 -0.0064 0.0465 -0.0286 -0.0942 -0.0132 -0.0042
-0.0242 0.0783 0.0575 0.1714 -0.0088 0.1662 0.0397 0.0763 0.1316 0.1585 0.0127 -0.0421 -0.0656 0.1197 0.0065 0.1536 0.0654
-0.0419 -0.0190 0.0348 -0.1226 -0.1889 -0.0749 -0.0229 0.0380 0.0755 -0.1247 -0.0688 -0.0541 -0.0439 -0.0448 -0.0187 0.0482 0.0128
-0.0049 0.0067 -0.0152 -0.0341 -0.0959 0.2192 0.0016 0.0007 -0.0571 0.0191 -0.1107 0.1071 0.0824 -0.0012 0.0855 -0.0336 -0.0002
0.0261 -0.1282 -0.0932 -0.2984 -0.1818 -0.3588 -0.0122 -0.0769 -0.1252 -0.1803 -0.2075 -0.1484 -0.2636 -0.3388 -0.0461 -0.3352 -0.1978
-0.1381 0.0048 0.0028 -0.0659 -0.1085 0.0235 -0.0952 0.0053 -0.0517 -0.0906 -0.0362 -0.1136 0.1058 0.1894 -0.1069 -0.0752 0.0131
-0.0792 -0.1343 -0.1127 -0.1882 -0.1604 -0.2556 -0.0913 -0.0729 -0.1052 -0.0745 -0.2401 0.0940 -0.1764 -0.1697 -0.0397 -0.1921 -0.1388
0.0000 0.1338 -0.0471 -0.2232 0.5636 -0.2686 -0.1705 -0.1507 -0.2501 -0.1758 -0.0923 -0.0715 -0.1999 -0.1011 -0.1042 -0.2758 -0.1299
17
Sep-08 0.0000 -0.0243 0.0000 0.0000 -0.0085 0.0000 0.0000 -0.0100 0.0000 0.0000 0.0000 -0.3025 -0.0437 0.0000
Oct-08 0.0000 -0.1855 -0.0351 -0.2123 0.0000 0.0000 0.0000 -0.0019 0.0000 -0.0056 0.0000 0.0000 0.0000 0.0000
Nov-08 0.0030 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 -0.0067 0.0000 0.0000 0.0000 0.0000
Dec-08 -0.4289 -0.1425 0.0000 0.0000 -0.2275 0.0000 -0.0499 0.0000 -0.1161 0.0000 -0.4589 0.0000 -0.1425 0.0000
Jan-09 0.4372 -0.4133 -0.0500 0.2695 0.1097 -0.4865 -0.3858 0.0019 -0.2415 -0.1855 -0.1231 -0.4744 -0.4862 -0.0500
Feb-09 0.0573 0.1706 -0.0974 0.0000 -0.1079 -0.3394 0.0894 0.0000 0.0035 -0.1990 0.1698 -0.0759 -0.0253 -0.0500
Mar-09 0.4029 0.3189 -0.4198 -0.5973 0.0617 -0.0776 0.0237 -0.4550 0.0022 0.3516 0.3646 0.1568 0.2002 -0.4609
Apr-09 -0.1601 0.1803 -0.3045 0.1080 0.0266 0.0373 0.2043 -0.0521 0.1756 -0.1496 0.3116 0.5260 0.7304 0.1542
May-09 0.0954 0.0045 0.8005 0.0138 0.0253 0.0882 -0.0023 -0.0174 -0.0472 -0.0498 0.1459 -0.0360 -0.0128 -0.0673
Jun-09 -0.0138 -0.0154 -0.1526 -0.0476 -0.0249 -0.2067 0.0363 -0.1013 -0.0012 0.1492 -0.0298 -0.0518 -0.1462 -0.0722
Jul-09 0.0862 0.2852 -0.0449 0.1208 0.0910 0.1926 0.4364 -0.0121 0.1477 0.0073 0.0585 -0.0491 0.5776 0.0058
Aug-09 -0.0651 0.0980 0.0001 -0.0693 0.0615 -0.0719 -0.1716 0.2239 0.1483 -0.0020 0.0691 -0.0796 -0.1477 0.0173
Sep-09 0.0195 0.2429 0.1170 -0.0337 0.0112 0.1093 0.0774 0.1183 0.0247 0.0931 0.1267 0.1585 0.2099 0.0989
Oct-09 -0.0596 0.1179 0.2035 0.3715 0.0400 0.1916 -0.0111 -0.0208 -0.0672 0.0001 -0.0205 0.1456 0.0627 0.1147
Nov-09 -0.0621 -0.0138 -0.0207 -0.0907 -0.0314 -0.1293 0.0825 -0.1511 -0.0286 0.0000 -0.0657 -0.0185 0.1694 0.3579
Dec-09 0.0042 -0.0455 0.1717 -0.0029 -0.0002 0.0800 -0.0452 0.0526 0.2629 0.0383 0.0294 -0.1466 -0.0975 -0.0616
MEAN 0.0047 0.0129 0.0054 0.0184 0.0091 0.0116 0.0036 0.0389 0.0060 0.0204 0.0205 -0.0019 0.0261 0.0085
- -
BETA 0.8484 0.9953 0.0509 0.2637 0.316 0.287 0.6163 0.0583 0.4906 0.2246 1.0848 0.4134 0.9036 0.1896
18
0.0000 -0.2419 0.0182 0.0000 -0.0927 -0.0021 -0.0046 -0.0357 0.0000 -0.0022 -0.0115 -0.0417 0.0000 0.3783 0.0000 0.0000 -0.0031
-0.0972 0.0000 -0.2842 0.0000 0.0000 0.0000 0.0000 0.0000 -0.0446 0.0000 0.0000 0.0000 -0.1020 0.0000 0.0005 0.0000 0.0003
-0.0443 0.0000 0.0000 0.0030 -0.1406 -0.1905 0.0000 0.0000 0.0000 0.0000 0.0000 -0.0176 0.0000 -0.3336 -0.0165 0.0000 0.0005
-0.1076 0.0000 -0.1831 -0.4607 -0.1425 -0.4023 -0.3434 -0.4706 -0.4595 -0.4646 -0.3188 -0.0500 -0.4594 -0.4377 -0.0500 -0.4585 -0.3616
0.0000 -0.4459 0.2682 0.1242 -0.4804 0.1664 0.1427 -0.0804 -0.1602 -0.1698 0.1787 -0.4375 0.1220 -0.2489 -0.1676 -0.3178 -0.0831
0.0514 0.1099 0.1145 0.1934 -0.1029 -0.1028 0.0857 0.2040 0.1643 -0.1555 -0.0289 0.0229 0.0233 0.3419 0.0000 0.1110 0.0651
0.2599 0.2764 -0.0521 0.3050 0.0944 0.2820 0.1796 0.3021 0.3860 0.1944 0.1636 0.1329 0.4778 0.1135 -0.2030 0.3530 0.1978
0.0588 -0.0824 0.4192 -0.1425 1.4221 0.0894 0.2803 0.0239 0.0097 -0.1235 0.0543 0.0247 0.1576 0.1458 0.0667 0.0899 0.0498
0.0296 0.0143 0.1467 -0.0573 -0.2627 0.1266 -0.0144 0.0591 -0.4434 -0.0228 -0.0061 0.0168 0.0791 -0.0009 0.2113 0.1233 0.0103
0.0432 -0.0124 -0.0437 -0.0588 -0.1195 0.0164 0.0411 0.0063 0.9403 -0.1208 0.0046 0.0091 0.0908 -0.0409 0.0506 0.1105 -0.0157
0.0359 0.0285 0.0529 0.0286 -0.1009 0.0608 0.0949 0.1055 0.1142 0.0645 0.2777 0.1557 0.0017 0.0380 0.0576 0.2260 0.0780
0.0919 0.1162 0.0462 0.0181 0.3438 0.1074 0.1116 0.2413 0.2154 0.0614 -0.0796 0.3048 0.0336 0.2734 -0.0244 -0.0768 0.1237
0.0168 0.0311 0.2992 0.1890 -0.0229 0.4970 -0.0479 -0.0050 0.0822 0.0545 0.0065 -0.0263 0.0098 0.0789 0.3466 0.0274 0.0777
-0.0255 -0.0566 -0.1115 -0.0143 0.0020 -0.0922 -0.0752 -0.0351 -0.0271 0.0764 -0.1205 0.0144 -0.1529 -0.0356 0.0061 -0.1578 -0.0204
-0.0062 -0.0124 -0.0536 -0.1166 -0.0618 0.1015 0.0375 0.0268 -0.0206 0.0414 -0.1064 -0.0415 -0.0499 0.0090 -0.0508 -0.0310 0.0051
-0.0402 0.0138 0.1303 0.0231 -0.0431 0.0510 0.0319 0.0397 -0.0031 -0.0256 0.0049 0.0096 -0.0449 0.0212 -0.0667 0.1571 0.0196
0.0030 -0.0042 0.0157 0.0116 0.0224 0.0117 0.0047 0.0148 0.0157 -0.0058 -0.0077 0.0179 0.0008 0.0358 0.0193 0.0045 0.0114
0.4772 0.4625 0.38056 1.4728 0.7186 1.3164 0.6842 1.2283 1.0969 1.1857 0.9065 0.6643 1.0372 1.2654 0.4766 1.33875 1
19
STEP 3
Third matrix (Table 1.5) is the calculation of the EXCESS MEAN MATRIX in which mean is less from the X values (prices) of
all the 30 companies from their calculated mean. As shown in the followings table after the formula:
=( )
TABLE 1.5
EXCESS
PKGS AGIL ATHL COLG ULEVER EFUL PSMC FZTM HABSM NESTLE ICI IGIIL INDU LAKST
Jan-05 -0.0140 -0.0313 0.0856 -0.0191 -0.0037 -0.0763 -0.0107 0.1416 -0.0862 -0.0396 0.0051 -0.0141 -0.0310 -0.0281
Feb-05 -0.1265 0.0863 0.0363 -0.0584 0.0563 -0.0053 0.2250 -0.0930 -0.0583 -0.0401 0.1834 0.1722 0.1167 -0.0751
Mar-05 -0.1376 -0.1270 -0.0174 -0.1544 -0.0597 0.0384 -0.1431 -0.1335 -0.1900 -0.0164 -0.1592 -0.0255 0.0084 -0.1942
Apr-05 -0.0380 -0.0129 0.1602 -0.0758 -0.0738 -0.0712 -0.1928 -0.0499 -0.1909 0.0777 -0.0819 -0.2517 -0.1886 0.0223
May-05 -0.0805 -0.1475 0.0367 -0.1449 -0.0105 -0.0623 -0.0953 -0.1278 0.0088 -0.0499 -0.2004 -0.0268 -0.1953 -0.0553
Jun-05 0.0401 0.0982 0.0113 0.0159 -0.0027 0.1284 -0.0862 -0.0511 0.0849 -0.0298 0.0353 -0.0129 0.0517 0.1433
Jul-05 0.0367 -0.0509 -0.0152 -0.0197 0.0533 -0.0657 0.0564 0.0475 0.0190 -0.0041 -0.0128 0.1619 0.0850 -0.0860
Aug-05 0.0104 -0.0774 -0.0517 -0.0493 -0.0512 -0.0163 0.0837 -0.0997 -0.0791 0.0081 0.1670 -0.0276 -0.0161 -0.0253
Sep-05 0.1186 0.0649 0.0780 -0.0344 0.0013 -0.0489 0.3066 -0.1194 0.0642 -0.0114 -0.0044 0.0767 0.2907 0.0386
Oct-05 -0.0811 -0.0438 -0.3643 0.1438 0.0323 -0.0310 0.2805 -0.0389 -0.0060 -0.0187 0.1901 -0.0559 0.0829 0.0079
Nov-05 0.1549 0.2052 -0.0204 0.3486 0.0505 -0.0449 -0.0482 0.5736 0.1022 0.1251 0.1534 0.0414 0.0925 0.2426
Dec-05 0.1298 0.0788 0.0000 -0.1337 0.1003 0.1520 0.1192 -0.0189 0.3639 0.1799 0.0284 0.1454 0.0399 0.0477
Jan-06 0.0770 0.3151 0.1661 0.4008 0.0985 -0.0175 0.3856 0.3923 -0.1939 0.0445 0.0058 0.1087 0.2360 -0.0662
Feb-06 -0.0125 0.0600 -0.1107 -0.1891 -0.0935 -0.0410 -0.0951 -0.1390 -0.0512 -0.0448 0.2347 0.0002 -0.1926 -0.0859
Mar-06 -0.0407 -0.0253 -0.0386 0.0927 0.0076 0.2608 -0.0207 -0.1079 0.0873 0.0108 -0.1482 0.0705 -0.0142 0.0195
Apr-06 0.0049 -0.1033 -0.0136 -0.0331 0.0018 -0.2379 0.1631 -0.0049 0.0399 0.0402 -0.1168 -0.1934 -0.0221 0.1803
May-06 -0.0331 -0.1254 0.0323 -0.0094 0.0044 0.0318 -0.0235 -0.1502 -0.0803 0.2792 -0.1796 0.6417 -0.0171 -0.1532
Jun-06 0.0165 -0.0439 0.0649 0.0053 0.0042 0.1329 0.0574 -0.0226 -0.0323 -0.0509 -0.1114 -0.1574 -0.0193 -0.0115
Jul-06 -0.0255 0.0699 0.0637 0.0799 0.0435 0.0812 0.1020 -0.0746 -0.0384 -0.0907 0.1307 0.0864 0.1139 -0.0353
Aug-06 -0.0176 -0.0465 -0.0022 0.1290 -0.0391 -0.0399 0.0798 -0.0463 0.0276 -0.1233 -0.0986 -0.0163 -0.0238 0.0278
Sep-06 -0.0136 0.1593 -0.3387 -0.2615 0.0321 0.0078 0.0699 -0.1285 0.0481 -0.0309 -0.0188 -0.0351 -0.0857 -0.0101
Oct-06 -0.0174 -0.0330 -0.0845 -0.0033 -0.0190 0.0836 0.0363 -0.0963 -0.0303 -0.0424 0.0131 0.0541 -0.0420 0.0915
Nov-06 0.0423 -0.0818 -0.1840 0.0771 -0.0091 0.0360 -0.0239 -0.0998 0.0321 -0.0092 -0.0364 0.0071 -0.0266 0.0522
Dec-06 -0.0206 -0.0259 0.0055 0.1805 -0.0091 -0.0529 0.0695 -0.1912 0.0852 0.0906 -0.0409 0.0383 -0.0556 0.0344
Jan-07 0.0144 0.1187 -0.0120 0.0089 0.0909 0.1053 0.0079 -0.1170 -0.2635 0.3026 0.0932 -0.0031 0.0507 0.7526
Feb-07 0.0439 -0.1059 -0.0462 -0.1556 -0.0546 0.1434 0.0661 0.1945 -0.1216 0.0831 -0.0167 0.1228 -0.0024 0.0090
Mar-07 0.0228 -0.0257 0.0459 0.0072 -0.0091 -0.0100 0.0887 0.0658 -0.0537 0.1302 0.0742 -0.0251 0.0855 -0.0299
Apr-07 0.0310 0.1871 0.0744 0.0066 -0.0043 -0.4220 -0.2842 0.2654 0.1443 -0.0383 0.0339 -0.3031 0.1909 -0.1252
May-07 0.1764 -0.0107 -0.0004 0.0157 0.0335 0.0565 -0.0211 0.6144 0.1440 -0.1120 0.0994 0.0454 -0.0509 0.0088
Jun-07 0.1597 0.0551 0.1980 0.0901 0.0068 0.4245 0.0631 0.0841 -0.0088 0.0102 -0.0633 0.2756 0.0460 -0.0085
Jul-07 -0.0661 0.0184 0.0234 0.0188 0.0468 0.0995 0.0247 0.0733 0.0292 -0.0431 -0.0640 -0.1056 -0.0245 -0.0171
Aug-07 -0.1202 -0.1109 -0.0272 0.0688 -0.0557 0.0984 -0.0807 0.1653 -0.0549 -0.0337 0.0020 -0.0681 -0.0727 -0.0409
Sep-07 0.3168 0.0306 -0.0745 -0.1146 0.0842 0.1851 0.0335 -0.0791 0.3283 -0.0137 0.3921 0.0275 0.1050 0.0506
Oct-07 0.0625 0.4246 0.0757 0.1298 0.0271 0.1521 -0.0063 0.0616 0.1503 -0.0004 -0.0468 0.1646 0.1427 -0.0223
Nov-07 0.0154 -0.2075 0.0856 0.4343 -0.0479 -0.0521 -0.0400 -0.0237 0.0125 0.1789 -0.1067 -0.0117 -0.0798 -0.1230
Dec-07 -0.0498 -0.0390 0.2719 -0.0684 -0.0785 0.3790 -0.1144 -0.0416 -0.0305 -0.0395 -0.0683 0.0622 -0.1516 -0.1124
20
MEAN MATRIX
KOHE SHEL MTL NBP RBS NML HUBC OGDC PSO ABL FCCL PAKT NRL MCB SIEM DGKC KSE 100
-0.0864 0.0664 -0.0148 0.1813 0.0058 0.2144 -0.0140 0.0659 0.0675 0.1161 -0.0393 0.0391 0.0010 0.0801 0.0278 0.0356 0.0737
0.0284 0.0271 -0.0454 0.4323 0.2968 0.1469 0.0488 0.4364 0.3122 0.2476 0.1755 -0.0563 0.4125 0.1612 0.0256 0.1631 0.2128
-0.1047 -0.1001 -0.0837 -0.1742 -0.2001 -0.2214 -0.0659 -0.0659 -0.0507 -0.1419 -0.1134 -0.1059 -0.0685 -0.2195 -0.0685 -0.1030 -0.0707
-0.0578 0.0584 -0.0654 -0.1773 -0.1328 -0.0652 -0.1000 -0.1578 -0.0911 -0.0549 -0.0628 -0.0179 -0.1028 0.1416 -0.0823 0.0046 -0.0971
-0.1048 -0.0464 -0.0546 -0.0582 -0.1180 -0.2093 -0.0856 -0.0457 -0.0402 -0.1364 -0.1992 -0.0994 -0.0055 -0.1347 0.1186 -0.1533 -0.0462
0.1525 0.1076 0.0243 0.1592 0.0633 0.1398 0.0049 0.1217 0.0595 0.1223 0.1208 0.2047 -0.1180 0.1321 0.0186 0.0780 0.0750
-0.1377 0.0171 -0.0541 -0.0329 0.0355 -0.0262 0.0010 -0.0485 -0.0485 0.1224 -0.0079 -0.2015 -0.0046 0.0550 -0.1288 -0.0090 -0.0478
0.0636 0.1923 -0.0007 0.1147 -0.1617 0.0644 0.0349 0.1080 0.0297 -0.0304 0.1347 0.2644 0.1222 0.1723 0.0725 0.1153 0.0747
-0.0135 -0.0955 0.6572 0.2106 0.1625 0.1607 0.0569 -0.0170 -0.0293 0.1347 0.1732 -0.0029 0.0194 0.1728 -0.0118 0.2424 0.0436
-0.0220 0.0292 -0.1941 0.0410 -0.0956 -0.0763 -0.2129 -0.0964 0.0492 0.0280 0.1920 -0.0767 0.0352 0.1265 -0.0223 0.1909 -0.0088
0.0463 -0.0039 0.0166 0.1732 0.2355 0.1648 0.0298 0.0334 0.0002 0.3556 0.3521 0.1446 0.0065 0.0289 0.3095 0.1692 0.0830
0.1258 0.3026 0.0104 0.0879 0.0487 0.0796 -0.0047 0.0604 -0.0149 0.0856 -0.1194 -0.0911 -0.0406 0.0378 -0.0351 -0.0243 0.0474
-0.0121 -0.0211 0.0774 0.2664 0.0440 0.1592 0.0516 0.0538 -0.0476 0.1645 0.0512 0.0706 0.0524 0.2142 0.1864 0.1868 0.0898
-0.0524 -0.1421 -0.0251 0.2838 -0.0755 0.0195 -0.0303 0.1501 0.0498 -0.0544 0.0452 -0.1118 -0.0218 0.2086 0.1134 0.1537 0.0772
0.0047 -0.0929 -0.0780 -0.1561 -0.1675 0.0025 -0.0735 0.0580 -0.1483 -0.2594 0.0258 -0.0840 -0.0815 -0.1735 0.0979 0.0226 -0.0088
0.0256 -0.0966 -0.0090 -0.1054 0.0319 -0.1337 -0.0329 -0.0193 -0.0988 -0.0874 -0.0810 0.1050 -0.1179 0.0235 0.0032 -0.2762 -0.0239
-0.0420 -0.1299 0.0588 -0.2138 -0.0353 -0.2170 -0.0897 -0.1952 -0.1268 -0.2166 -0.1589 -0.0641 -0.1420 -0.2052 -0.0669 -0.1799 -0.1473
-0.0050 0.0434 -0.0234 0.0434 0.1645 0.0687 0.1200 0.0486 0.0007 -0.0326 0.0051 -0.0127 0.0261 0.0263 -0.1116 -0.0128 0.0079
0.0221 0.1571 0.0030 0.0343 -0.0902 -0.1014 0.0519 0.0360 0.1644 -0.0442 0.2082 -0.0127 -0.0214 0.0234 -0.0863 0.0693 0.0395
-0.0408 0.1101 0.0548 -0.0174 0.5689 -0.1579 0.0900 -0.1171 -0.1162 -0.0205 -0.0942 -0.0208 0.0738 -0.0735 -0.1110 -0.0475 -0.0527
0.0087 -0.2284 -0.0473 0.1184 0.1652 0.0841 -0.0272 -0.0237 -0.0643 0.2558 0.0367 -0.0763 -0.0151 0.1539 -0.0393 0.0333 0.0331
0.0435 -0.1019 -0.1627 0.1137 0.1408 -0.0677 -0.0201 0.1483 -0.0543 0.0966 -0.0768 0.1007 -0.0288 0.0407 0.0011 -0.1191 0.0661
-0.0271 -0.0302 -0.0191 -0.0569 -0.0662 0.0316 0.0988 -0.1594 -0.0024 -0.0318 -0.1743 -0.0830 0.0265 -0.1068 0.0107 -0.1810 -0.0740
-0.0581 -0.0142 -0.0641 -0.1866 -0.1579 -0.0123 -0.0277 -0.1064 -0.0565 -0.1373 -0.0456 0.0496 -0.0681 -0.0672 0.0487 -0.0888 -0.0642
0.0793 0.0358 0.0534 0.2325 0.0695 0.1664 0.1511 0.0626 0.1499 0.1320 0.0508 0.1349 0.0302 0.1705 0.1580 0.1335 0.1093
-0.0383 -0.0750 -0.0425 -0.0485 0.0221 -0.0600 -0.0156 -0.0570 0.0296 0.1093 0.0395 -0.0817 -0.0704 -0.0524 -0.1390 0.1010 -0.0196
-0.0415 0.0333 -0.0545 -0.1590 -0.0272 0.0096 -0.0871 -0.0186 -0.0164 -0.1093 0.0293 0.0182 -0.0303 -0.1121 -0.1333 0.0680 -0.0032
0.2270 -0.0006 0.0762 0.0734 0.0747 0.1225 0.1560 0.0201 -0.0003 0.3020 0.2246 0.2734 0.2648 0.0653 0.2021 0.1712 0.0860
0.1709 0.0504 0.1249 0.0063 -0.0867 0.1162 0.0281 -0.0189 0.0107 -0.0684 -0.0492 0.4497 0.1127 0.1083 0.3425 0.0348 0.0364
0.0357 0.0142 -0.0476 0.0227 -0.0577 0.0019 0.0530 -0.0365 0.0423 0.1916 0.0418 0.0113 0.0066 0.0348 0.0134 0.0976 0.0512
-0.0297 0.1452 -0.0202 -0.0154 0.0545 -0.0301 -0.0074 0.0086 -0.0564 -0.1363 0.0636 -0.0115 0.2895 -0.1465 0.0003 -0.0629 -0.0138
-0.1263 -0.1729 -0.0596 -0.1304 -0.1974 -0.2522 -0.2000 -0.1510 -0.1395 -0.1885 -0.1461 -0.1824 -0.0235 -0.0761 -0.1561 -0.1568 -0.1224
0.1501 0.0794 -0.0585 0.0492 0.1540 0.1893 0.1362 0.0711 0.0802 0.1058 0.0503 0.1943 -0.0995 0.0332 0.0868 0.1783 0.0817
-0.0708 0.0744 -0.0802 0.0089 -0.0657 -0.0254 -0.0196 0.1000 0.1137 0.1371 -0.0032 0.0071 -0.0100 0.1057 0.1648 -0.0864 0.0611
-0.0147 -0.0047 -0.0210 -0.0317 -0.0974 -0.0278 -0.0923 -0.0718 0.0397 -0.0504 -0.1273 -0.0666 0.0044 -0.0563 -0.1693 -0.0164 -0.0338
-0.0677 -0.0704 -0.0530 -0.0602 -0.0255 -0.0836 0.0053 -0.0268 -0.0696 0.0219 -0.0432 -0.0211 -0.0656 0.0385 -0.0199 -0.0556 -0.0059
21
TABLE 1.5 (CONT.)

Jan-08 0.0082 -0.1011 -0.1034 -0.0501 0.0216 -0.1657 -0.1524 -0.0263 -0.2977 -0.0811 0.0366 -0.1359 -0.1304 -0.0063
Feb-08 -0.0060 -0.1618 0.0140 -0.0456 -0.0091 0.3255 -0.0164 -0.0018 0.3098 -0.0742 -0.0077 0.1504 0.0232 -0.0543
Mar-08 0.0205 -0.0254 -0.0493 -0.2282 -0.0091 -0.2136 -0.0830 0.1759 0.0320 -0.0267 -0.0111 -0.2177 -0.0761 -0.1847
Apr-08 -0.1100 0.0239 0.1625 0.1002 0.0377 -0.1309 -0.1526 0.1005 0.0730 -0.0770 -0.2152 -0.0401 0.1490 0.0915
May-08 -0.3297 0.0103 -0.1233 -0.0342 -0.0063 -0.2596 -0.2849 0.1835 -0.1399 -0.1654 -0.0305 -0.3260 -0.3093 -0.2382
Jun-08 0.1011 -0.0726 0.0348 -0.0139 -0.0565 0.0188 -0.2355 0.0697 -0.0915 0.2583 -0.0786 0.0976 -0.1910 0.1391
Jul-08 -0.1947 -0.3298 -0.1101 0.0700 -0.0346 -0.1435 -0.1669 -0.0389 -0.1367 -0.1275 -0.1600 -0.2006 -0.1932 0.1001
Aug-08 -0.3099 -0.2116 -0.0214 -0.0625 0.0215 0.0662 -0.1676 -0.0389 -0.1188 -0.0986 -0.0497 -0.0800 -0.1289 -0.1227
Sep-08 -0.0047 -0.0372 -0.0054 -0.0184 -0.0176 -0.0116 -0.0036 -0.0489 -0.0060 -0.0204 -0.0205 -0.3005 -0.0698 -0.0085
Oct-08 -0.0047 -0.1984 -0.0405 -0.2307 -0.0091 -0.0116 -0.0036 -0.0409 -0.0060 -0.0260 -0.0205 0.0019 -0.0261 -0.0085
Nov-08 -0.0016 -0.0129 -0.0054 -0.0184 -0.0091 -0.0116 -0.0036 -0.0389 -0.0060 -0.0271 -0.0205 0.0019 -0.0261 -0.0085
Dec-08 -0.4336 -0.1554 -0.0054 -0.0184 -0.2366 -0.0116 -0.0535 -0.0389 -0.1221 -0.0204 -0.4795 0.0019 -0.1686 -0.0085
Jan-09 0.4326 -0.4263 -0.0553 0.2511 0.1006 -0.4982 -0.3893 -0.0370 -0.2475 -0.2059 -0.1437 -0.4725 -0.5124 -0.0584
Feb-09 0.0526 0.1577 -0.1028 -0.0184 -0.1170 -0.3511 0.0858 -0.0389 -0.0025 -0.2195 0.1493 -0.0740 -0.0515 -0.0584
Mar-09 0.3982 0.3060 -0.4251 -0.6157 0.0526 -0.0892 0.0201 -0.4939 -0.0038 0.3312 0.3441 0.1587 0.1741 -0.4694
Apr-09 -0.1648 0.1674 -0.3099 0.0896 0.0175 0.0256 0.2007 -0.0910 0.1697 -0.1700 0.2911 0.5279 0.7043 0.1458
May-09 0.0907 -0.0084 0.7952 -0.0046 0.0162 0.0766 -0.0059 -0.0563 -0.0532 -0.0702 0.1254 -0.0341 -0.0389 -0.0758
Jun-09 -0.0185 -0.0283 -0.1580 -0.0660 -0.0341 -0.2183 0.0327 -0.1402 -0.0071 0.1287 -0.0503 -0.0499 -0.1723 -0.0806
Jul-09 0.0815 0.2723 -0.0502 0.1024 0.0819 0.1810 0.4328 -0.0510 0.1417 -0.0131 0.0380 -0.0472 0.5515 -0.0026
Aug-09 -0.0698 0.0851 -0.0052 -0.0877 0.0524 -0.0835 -0.1752 0.1850 0.1423 -0.0224 0.0486 -0.0777 -0.1738 0.0089
Sep-09 0.0148 0.2300 0.1116 -0.0521 0.0021 0.0977 0.0738 0.0793 0.0187 0.0726 0.1062 0.1604 0.1838 0.0904
Oct-09 -0.0643 0.1050 0.1981 0.3531 0.0309 0.1800 -0.0147 -0.0598 -0.0731 -0.0204 -0.0410 0.1476 0.0365 0.1062
Nov-09 -0.0668 -0.0267 -0.0261 -0.1091 -0.0405 -0.1410 0.0789 -0.1900 -0.0346 -0.0205 -0.0862 -0.0166 0.1432 0.3494
Dec-09 -0.0005 -0.0584 0.1663 -0.0213 -0.0093 0.0684 -0.0488 0.0137 0.2569 0.0178 0.0089 -0.1447 -0.1237 -0.0700
22
0.0347 0.1044 -0.0123 -0.0351 -0.0756 -0.0649 0.0265 -0.0115 0.0623 -0.0016 0.0681 -0.0243 0.0457 -0.0644 -0.1135 -0.0177 -0.0156
-0.0273 0.0825 0.0418 0.1597 -0.0312 0.1545 0.0351 0.0615 0.1159 0.1644 0.0204 -0.0599 -0.0665 0.0839 -0.0128 0.1490 0.0540
-0.0450 -0.0147 0.0192 -0.1342 -0.2113 -0.0866 -0.0276 0.0232 0.0598 -0.1189 -0.0610 -0.0719 -0.0447 -0.0806 -0.0380 0.0437 0.0014
-0.0079 0.0109 -0.0308 -0.0458 -0.1183 0.2075 -0.0031 -0.0141 -0.0728 0.0249 -0.1030 0.0893 0.0816 -0.0370 0.0662 -0.0382 -0.0116
0.0230 -0.1239 -0.1088 -0.3100 -0.2042 -0.3705 -0.0169 -0.0917 -0.1409 -0.1745 -0.1998 -0.1662 -0.2644 -0.3746 -0.0654 -0.3397 -0.2093
-0.1411 0.0091 -0.0128 -0.0775 -0.1309 0.0117 -0.0999 -0.0095 -0.0674 -0.0848 -0.0285 -0.1315 0.1050 0.1536 -0.1262 -0.0798 0.0017
-0.0822 -0.1301 -0.1284 -0.1998 -0.1828 -0.2673 -0.0959 -0.0877 -0.1209 -0.0687 -0.2324 0.0762 -0.1772 -0.2055 -0.0590 -0.1967 -0.1502
-0.0030 0.1380 -0.0627 -0.2348 0.5412 -0.2803 -0.1751 -0.1655 -0.2658 -0.1700 -0.0846 -0.0893 -0.2007 -0.1369 -0.1235 -0.2804 -0.1414
-0.0030 -0.2376 0.0026 -0.0116 -0.1151 -0.0138 -0.0093 -0.0506 -0.0157 0.0036 -0.0037 -0.0596 -0.0008 0.3425 -0.0193 -0.0045 -0.0145
-0.1002 0.0042 -0.2999 -0.0116 -0.0224 -0.0117 -0.0047 -0.0148 -0.0603 0.0058 0.0077 -0.0179 -0.1028 -0.0358 -0.0188 -0.0045 -0.0111
-0.0473 0.0042 -0.0157 -0.0086 -0.1630 -0.2022 -0.0047 -0.0148 -0.0157 0.0058 0.0077 -0.0354 -0.0008 -0.3694 -0.0358 -0.0045 -0.0109
-0.1106 0.0042 -0.1987 -0.4723 -0.1649 -0.4140 -0.3481 -0.4854 -0.4752 -0.4588 -0.3111 -0.0678 -0.4602 -0.4735 -0.0693 -0.4630 -0.3730
-0.0030 -0.4417 0.2526 0.1126 -0.5028 0.1547 0.1380 -0.0952 -0.1759 -0.1639 0.1865 -0.4554 0.1212 -0.2846 -0.1869 -0.3224 -0.0945
0.0484 0.1142 0.0989 0.1818 -0.1253 -0.1145 0.0810 0.1892 0.1486 -0.1497 -0.0212 0.0051 0.0225 0.3061 -0.0193 0.1064 0.0537
0.2568 0.2806 -0.0678 0.2934 0.0720 0.2703 0.1750 0.2873 0.3703 0.2002 0.1713 0.1151 0.4769 0.0777 -0.2223 0.3484 0.1864
0.0558 -0.0781 0.4036 -0.1541 1.3997 0.0777 0.2756 0.0091 -0.0060 -0.1177 0.0620 0.0068 0.1568 0.1100 0.0474 0.0853 0.0384
0.0266 0.0185 0.1311 -0.0689 -0.2852 0.1148 -0.0191 0.0443 -0.4591 -0.0170 0.0017 -0.0011 0.0783 -0.0366 0.1919 0.1187 -0.0011
0.0401 -0.0081 -0.0594 -0.0705 -0.1419 0.0047 0.0365 -0.0085 0.9246 -0.1150 0.0123 -0.0087 0.0900 -0.0767 0.0313 0.1059 -0.0271
0.0328 0.0328 0.0372 0.0170 -0.1233 0.0491 0.0902 0.0907 0.0985 0.0703 0.2854 0.1378 0.0009 0.0022 0.0383 0.2214 0.0666
0.0888 0.1205 0.0305 0.0065 0.3214 0.0957 0.1069 0.2265 0.1997 0.0673 -0.0718 0.2869 0.0328 0.2376 -0.0437 -0.0813 0.1123
0.0137 0.0353 0.2836 0.1774 -0.0454 0.4853 -0.0526 -0.0198 0.0665 0.0604 0.0142 -0.0442 0.0090 0.0431 0.3273 0.0229 0.0663
-0.0285 -0.0524 -0.1271 -0.0259 -0.0204 -0.1039 -0.0799 -0.0499 -0.0428 0.0822 -0.1128 -0.0035 -0.1538 -0.0714 -0.0132 -0.1623 -0.0318
-0.0092 -0.0081 -0.0693 -0.1282 -0.0843 0.0898 0.0329 0.0120 -0.0363 0.0472 -0.0987 -0.0593 -0.0507 -0.0268 -0.0701 -0.0355 -0.0063
-0.0433 0.0180 0.1146 0.0115 -0.0655 0.0393 0.0272 0.0249 -0.0187 -0.0197 0.0126 -0.0082 -0.0457 -0.0146 -0.0860 0.1525 0.0082
STEP 4
After the calculation of excess mean matrix, we transpose (means transfer rows into columns and columns into rows) excess
mean matrix in the following table (Table 1.6) named as TRANSPOSE EXCESS MEAN MATRIX. To calculate this matrix, firstly
we write the names of the companies in rows and months in columns, after that we select all the rows and columns inside the
matrix under the column names and after the companies’ names in rows in Excel Sheet. Right after we write formula in the
very first column in the Excel Sheet, formula is as followings:
23
= ( )
and press Ctrl+Shift+Enter and we have all the values in the matrix. As shown below in the table:
TABLE 1.6
Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06
PKGS -0.0140 -0.1265 -0.1376 -0.0380 -0.0805 0.0401 0.0367 0.0104 0.1186 -0.0811 0.1549 0.1298 0.0770 -0.0125 -0.0407 0.0049 -0.0331 0.0165
AGIL -0.0313 0.0863 -0.1270 -0.0129 -0.1475 0.0982 -0.0509 -0.0774 0.0649 -0.0438 0.2052 0.0788 0.3151 0.0600 -0.0253 -0.1033 -0.1254 -0.0439
ATHL 0.0856 0.0363 -0.0174 0.1602 0.0367 0.0113 -0.0152 -0.0517 0.0780 -0.3643 -0.0204 0.0000 0.1661 -0.1107 -0.0386 -0.0136 0.0323 0.0649
COLG -0.0191 -0.0584 -0.1544 -0.0758 -0.1449 0.0159 -0.0197 -0.0493 -0.0344 0.1438 0.3486 -0.1337 0.4008 -0.1891 0.0927 -0.0331 -0.0094 0.0053
ULEVER -0.0037 0.0563 -0.0597 -0.0738 -0.0105 -0.0027 0.0533 -0.0512 0.0013 0.0323 0.0505 0.1003 0.0985 -0.0935 0.0076 0.0018 0.0044 0.0042
EFUL -0.0763 -0.0053 0.0384 -0.0712 -0.0623 0.1284 -0.0657 -0.0163 -0.0489 -0.0310 -0.0449 0.1520 -0.0175 -0.0410 0.2608 -0.2379 0.0318 0.1329
PSMC -0.0107 0.2250 -0.1431 -0.1928 -0.0953 -0.0862 0.0564 0.0837 0.3066 0.2805 -0.0482 0.1192 0.3856 -0.0951 -0.0207 0.1631 -0.0235 0.0574
FZTM 0.1416 -0.0930 -0.1335 -0.0499 -0.1278 -0.0511 0.0475 -0.0997 -0.1194 -0.0389 0.5736 -0.0189 0.3923 -0.1390 -0.1079 -0.0049 -0.1502 -0.0226
HABSM -0.0862 -0.0583 -0.1900 -0.1909 0.0088 0.0849 0.0190 -0.0791 0.0642 -0.0060 0.1022 0.3639 -0.1939 -0.0512 0.0873 0.0399 -0.0803 -0.0323
NESTLE -0.0396 -0.0401 -0.0164 0.0777 -0.0499 -0.0298 -0.0041 0.0081 -0.0114 -0.0187 0.1251 0.1799 0.0445 -0.0448 0.0108 0.0402 0.2792 -0.0509
ICI 0.0051 0.1834 -0.1592 -0.0819 -0.2004 0.0353 -0.0128 0.1670 -0.0044 0.1901 0.1534 0.0284 0.0058 0.2347 -0.1482 -0.1168 -0.1796 -0.1114
IGIIL -0.0141 0.1722 -0.0255 -0.2517 -0.0268 -0.0129 0.1619 -0.0276 0.0767 -0.0559 0.0414 0.1454 0.1087 0.0002 0.0705 -0.1934 0.6417 -0.1574
INDU -0.0310 0.1167 0.0084 -0.1886 -0.1953 0.0517 0.0850 -0.0161 0.2907 0.0829 0.0925 0.0399 0.2360 -0.1926 -0.0142 -0.0221 -0.0171 -0.0193
LAKST -0.0281 -0.0751 -0.1942 0.0223 -0.0553 0.1433 -0.0860 -0.0253 0.0386 0.0079 0.2426 0.0477 -0.0662 -0.0859 0.0195 0.1803 -0.1532 -0.0115
KOHE -0.0864 0.0284 -0.1047 -0.0578 -0.1048 0.1525 -0.1377 0.0636 -0.0135 -0.0220 0.0463 0.1258 -0.0121 -0.0524 0.0047 0.0256 -0.0420 -0.0050
SHEL 0.0664 0.0271 -0.1001 0.0584 -0.0464 0.1076 0.0171 0.1923 -0.0955 0.0292 -0.0039 0.3026 -0.0211 -0.1421 -0.0929 -0.0966 -0.1299 0.0434
MTL -0.0148 -0.0454 -0.0837 -0.0654 -0.0546 0.0243 -0.0541 -0.0007 0.6572 -0.1941 0.0166 0.0104 0.0774 -0.0251 -0.0780 -0.0090 0.0588 -0.0234
NBP 0.1813 0.4323 -0.1742 -0.1773 -0.0582 0.1592 -0.0329 0.1147 0.2106 0.0410 0.1732 0.0879 0.2664 0.2838 -0.1561 -0.1054 -0.2138 0.0434
RBS 0.0058 0.2968 -0.2001 -0.1328 -0.1180 0.0633 0.0355 -0.1617 0.1625 -0.0956 0.2355 0.0487 0.0440 -0.0755 -0.1675 0.0319 -0.0353 0.1645
NML 0.2144 0.1469 -0.2214 -0.0652 -0.2093 0.1398 -0.0262 0.0644 0.1607 -0.0763 0.1648 0.0796 0.1592 0.0195 0.0025 -0.1337 -0.2170 0.0687
HUBC -0.0140 0.0488 -0.0659 -0.1000 -0.0856 0.0049 0.0010 0.0349 0.0569 -0.2129 0.0298 -0.0047 0.0516 -0.0303 -0.0735 -0.0329 -0.0897 0.1200
OGDC 0.0659 0.4364 -0.0659 -0.1578 -0.0457 0.1217 -0.0485 0.1080 -0.0170 -0.0964 0.0334 0.0604 0.0538 0.1501 0.0580 -0.0193 -0.1952 0.0486
PSO 0.0675 0.3122 -0.0507 -0.0911 -0.0402 0.0595 -0.0485 0.0297 -0.0293 0.0492 0.0002 -0.0149 -0.0476 0.0498 -0.1483 -0.0988 -0.1268 0.0007
ABL 0.1161 0.2476 -0.1419 -0.0549 -0.1364 0.1223 0.1224 -0.0304 0.1347 0.0280 0.3556 0.0856 0.1645 -0.0544 -0.2594 -0.0874 -0.2166 -0.0326
FCCL -0.0393 0.1755 -0.1134 -0.0628 -0.1992 0.1208 -0.0079 0.1347 0.1732 0.1920 0.3521 -0.1194 0.0512 0.0452 0.0258 -0.0810 -0.1589 0.0051
PAKT 0.0391 -0.0563 -0.1059 -0.0179 -0.0994 0.2047 -0.2015 0.2644 -0.0029 -0.0767 0.1446 -0.0911 0.0706 -0.1118 -0.0840 0.1050 -0.0641 -0.0127
NRL 0.0010 0.4125 -0.0685 -0.1028 -0.0055 -0.1180 -0.0046 0.1222 0.0194 0.0352 0.0065 -0.0406 0.0524 -0.0218 -0.0815 -0.1179 -0.1420 0.0261
MCB 0.0801 0.1612 -0.2195 0.1416 -0.1347 0.1321 0.0550 0.1723 0.1728 0.1265 0.0289 0.0378 0.2142 0.2086 -0.1735 0.0235 -0.2052 0.0263
SIEM 0.0278 0.0256 -0.0685 -0.0823 0.1186 0.0186 -0.1288 0.0725 -0.0118 -0.0223 0.3095 -0.0351 0.1864 0.1134 0.0979 0.0032 -0.0669 -0.1116
DGKC 0.0356 0.1631 -0.1030 0.0046 -0.1533 0.0780 -0.0090 0.1153 0.2424 0.1909 0.1692 -0.0243 0.1868 0.1537 0.0226 -0.2762 -0.1799 -0.0128
24
Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08
-0.0255 -0.0176 -0.0136 -0.0174 0.0423 -0.0206 0.0144 0.0439 0.0228 0.0310 0.1764 0.1597 -0.0661 -0.1202 0.3168 0.0625 0.0154 -0.0498 0.0082
0.0699 -0.0465 0.1593 -0.0330 -0.0818 -0.0259 0.1187 -0.1059 -0.0257 0.1871 -0.0107 0.0551 0.0184 -0.1109 0.0306 0.4246 -0.2075 -0.0390 -0.1011
0.0637 -0.0022 -0.3387 -0.0845 -0.1840 0.0055 -0.0120 -0.0462 0.0459 0.0744 -0.0004 0.1980 0.0234 -0.0272 -0.0745 0.0757 0.0856 0.2719 -0.1034
0.0799 0.1290 -0.2615 -0.0033 0.0771 0.1805 0.0089 -0.1556 0.0072 0.0066 0.0157 0.0901 0.0188 0.0688 -0.1146 0.1298 0.4343 -0.0684 -0.0501
0.0435 -0.0391 0.0321 -0.0190 -0.0091 -0.0091 0.0909 -0.0546 -0.0091 -0.0043 0.0335 0.0068 0.0468 -0.0557 0.0842 0.0271 -0.0479 -0.0785 0.0216
0.0812 -0.0399 0.0078 0.0836 0.0360 -0.0529 0.1053 0.1434 -0.0100 -0.4220 0.0565 0.4245 0.0995 0.0984 0.1851 0.1521 -0.0521 0.3790 -0.1657
0.1020 0.0798 0.0699 0.0363 -0.0239 0.0695 0.0079 0.0661 0.0887 -0.2842 -0.0211 0.0631 0.0247 -0.0807 0.0335 -0.0063 -0.0400 -0.1144 -0.1524
-0.0746 -0.0463 -0.1285 -0.0963 -0.0998 -0.1912 -0.1170 0.1945 0.0658 0.2654 0.6144 0.0841 0.0733 0.1653 -0.0791 0.0616 -0.0237 -0.0416 -0.0263
-0.0384 0.0276 0.0481 -0.0303 0.0321 0.0852 -0.2635 -0.1216 -0.0537 0.1443 0.1440 -0.0088 0.0292 -0.0549 0.3283 0.1503 0.0125 -0.0305 -0.2977
-0.0907 -0.1233 -0.0309 -0.0424 -0.0092 0.0906 0.3026 0.0831 0.1302 -0.0383 -0.1120 0.0102 -0.0431 -0.0337 -0.0137 -0.0004 0.1789 -0.0395 -0.0811
0.1307 -0.0986 -0.0188 0.0131 -0.0364 -0.0409 0.0932 -0.0167 0.0742 0.0339 0.0994 -0.0633 -0.0640 0.0020 0.3921 -0.0468 -0.1067 -0.0683 0.0366
0.0864 -0.0163 -0.0351 0.0541 0.0071 0.0383 -0.0031 0.1228 -0.0251 -0.3031 0.0454 0.2756 -0.1056 -0.0681 0.0275 0.1646 -0.0117 0.0622 -0.1359
0.1139 -0.0238 -0.0857 -0.0420 -0.0266 -0.0556 0.0507 -0.0024 0.0855 0.1909 -0.0509 0.0460 -0.0245 -0.0727 0.1050 0.1427 -0.0798 -0.1516 -0.1304
-0.0353 0.0278 -0.0101 0.0915 0.0522 0.0344 0.7526 0.0090 -0.0299 -0.1252 0.0088 -0.0085 -0.0171 -0.0409 0.0506 -0.0223 -0.1230 -0.1124 -0.0063
0.0221 -0.0408 0.0087 0.0435 -0.0271 -0.0581 0.0793 -0.0383 -0.0415 0.2270 0.1709 0.0357 -0.0297 -0.1263 0.1501 -0.0708 -0.0147 -0.0677 0.0347
0.1571 0.1101 -0.2284 -0.1019 -0.0302 -0.0142 0.0358 -0.0750 0.0333 -0.0006 0.0504 0.0142 0.1452 -0.1729 0.0794 0.0744 -0.0047 -0.0704 0.1044
0.0030 0.0548 -0.0473 -0.1627 -0.0191 -0.0641 0.0534 -0.0425 -0.0545 0.0762 0.1249 -0.0476 -0.0202 -0.0596 -0.0585 -0.0802 -0.0210 -0.0530 -0.0123
0.0343 -0.0174 0.1184 0.1137 -0.0569 -0.1866 0.2325 -0.0485 -0.1590 0.0734 0.0063 0.0227 -0.0154 -0.1304 0.0492 0.0089 -0.0317 -0.0602 -0.0351
-0.0902 0.5689 0.1652 0.1408 -0.0662 -0.1579 0.0695 0.0221 -0.0272 0.0747 -0.0867 -0.0577 0.0545 -0.1974 0.1540 -0.0657 -0.0974 -0.0255 -0.0756
-0.1014 -0.1579 0.0841 -0.0677 0.0316 -0.0123 0.1664 -0.0600 0.0096 0.1225 0.1162 0.0019 -0.0301 -0.2522 0.1893 -0.0254 -0.0278 -0.0836 -0.0649
0.0519 0.0900 -0.0272 -0.0201 0.0988 -0.0277 0.1511 -0.0156 -0.0871 0.1560 0.0281 0.0530 -0.0074 -0.2000 0.1362 -0.0196 -0.0923 0.0053 0.0265
0.0360 -0.1171 -0.0237 0.1483 -0.1594 -0.1064 0.0626 -0.0570 -0.0186 0.0201 -0.0189 -0.0365 0.0086 -0.1510 0.0711 0.1000 -0.0718 -0.0268 -0.0115
0.1644 -0.1162 -0.0643 -0.0543 -0.0024 -0.0565 0.1499 0.0296 -0.0164 -0.0003 0.0107 0.0423 -0.0564 -0.1395 0.0802 0.1137 0.0397 -0.0696 0.0623
-0.0442 -0.0205 0.2558 0.0966 -0.0318 -0.1373 0.1320 0.1093 -0.1093 0.3020 -0.0684 0.1916 -0.1363 -0.1885 0.1058 0.1371 -0.0504 0.0219 -0.0016
0.2082 -0.0942 0.0367 -0.0768 -0.1743 -0.0456 0.0508 0.0395 0.0293 0.2246 -0.0492 0.0418 0.0636 -0.1461 0.0503 -0.0032 -0.1273 -0.0432 0.0681
-0.0127 -0.0208 -0.0763 0.1007 -0.0830 0.0496 0.1349 -0.0817 0.0182 0.2734 0.4497 0.0113 -0.0115 -0.1824 0.1943 0.0071 -0.0666 -0.0211 -0.0243
-0.0214 0.0738 -0.0151 -0.0288 0.0265 -0.0681 0.0302 -0.0704 -0.0303 0.2648 0.1127 0.0066 0.2895 -0.0235 -0.0995 -0.0100 0.0044 -0.0656 0.0457
0.0234 -0.0735 0.1539 0.0407 -0.1068 -0.0672 0.1705 -0.0524 -0.1121 0.0653 0.1083 0.0348 -0.1465 -0.0761 0.0332 0.1057 -0.0563 0.0385 -0.0644
-0.0863 -0.1110 -0.0393 0.0011 0.0107 0.0487 0.1580 -0.1390 -0.1333 0.2021 0.3425 0.0134 0.0003 -0.1561 0.0868 0.1648 -0.1693 -0.0199 -0.1135
0.0693 -0.0475 0.0333 -0.1191 -0.1810 -0.0888 0.1335 0.1010 0.0680 0.1712 0.0348 0.0976 -0.0629 -0.1568 0.1783 -0.0864 -0.0164 -0.0556 -0.0177
25
TABLE 1.6 (CONT.)

Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08
-0.0060 0.0205 -0.1100 -0.3297 0.1011 -0.1947 -0.3099 -0.0047 -0.0047 -0.0016 -0.4336
-0.1618 -0.0254 0.0239 0.0103 -0.0726 -0.3298 -0.2116 -0.0372 -0.1984 -0.0129 -0.1554
0.0140 -0.0493 0.1625 -0.1233 0.0348 -0.1101 -0.0214 -0.0054 -0.0405 -0.0054 -0.0054
-0.0456 -0.2282 0.1002 -0.0342 -0.0139 0.0700 -0.0625 -0.0184 -0.2307 -0.0184 -0.0184
-0.0091 -0.0091 0.0377 -0.0063 -0.0565 -0.0346 0.0215 -0.0176 -0.0091 -0.0091 -0.2366
0.3255 -0.2136 -0.1309 -0.2596 0.0188 -0.1435 0.0662 -0.0116 -0.0116 -0.0116 -0.0116
-0.0164 -0.0830 -0.1526 -0.2849 -0.2355 -0.1669 -0.1676 -0.0036 -0.0036 -0.0036 -0.0535
-0.0018 0.1759 0.1005 0.1835 0.0697 -0.0389 -0.0389 -0.0489 -0.0409 -0.0389 -0.0389
0.3098 0.0320 0.0730 -0.1399 -0.0915 -0.1367 -0.1188 -0.0060 -0.0060 -0.0060 -0.1221
-0.0742 -0.0267 -0.0770 -0.1654 0.2583 -0.1275 -0.0986 -0.0204 -0.0260 -0.0271 -0.0204
-0.0077 -0.0111 -0.2152 -0.0305 -0.0786 -0.1600 -0.0497 -0.0205 -0.0205 -0.0205 -0.4795
0.1504 -0.2177 -0.0401 -0.3260 0.0976 -0.2006 -0.0800 -0.3005 0.0019 0.0019 0.0019
0.0232 -0.0761 0.1490 -0.3093 -0.1910 -0.1932 -0.1289 -0.0698 -0.0261 -0.0261 -0.1686
-0.0543 -0.1847 0.0915 -0.2382 0.1391 0.1001 -0.1227 -0.0085 -0.0085 -0.0085 -0.0085
-0.0273 -0.0450 -0.0079 0.0230 -0.1411 -0.0822 -0.0030 -0.0030 -0.1002 -0.0473 -0.1106
0.0825 -0.0147 0.0109 -0.1239 0.0091 -0.1301 0.1380 -0.2376 0.0042 0.0042 0.0042
0.0418 0.0192 -0.0308 -0.1088 -0.0128 -0.1284 -0.0627 0.0026 -0.2999 -0.0157 -0.1987
0.1597 -0.1342 -0.0458 -0.3100 -0.0775 -0.1998 -0.2348 -0.0116 -0.0116 -0.0086 -0.4723
-0.0312 -0.2113 -0.1183 -0.2042 -0.1309 -0.1828 0.5412 -0.1151 -0.0224 -0.1630 -0.1649
0.1545 -0.0866 0.2075 -0.3705 0.0117 -0.2673 -0.2803 -0.0138 -0.0117 -0.2022 -0.4140
0.0351 -0.0276 -0.0031 -0.0169 -0.0999 -0.0959 -0.1751 -0.0093 -0.0047 -0.0047 -0.3481
0.0615 0.0232 -0.0141 -0.0917 -0.0095 -0.0877 -0.1655 -0.0506 -0.0148 -0.0148 -0.4854
0.1159 0.0598 -0.0728 -0.1409 -0.0674 -0.1209 -0.2658 -0.0157 -0.0603 -0.0157 -0.4752
0.1644 -0.1189 0.0249 -0.1745 -0.0848 -0.0687 -0.1700 0.0036 0.0058 0.0058 -0.4588
0.0204 -0.0610 -0.1030 -0.1998 -0.0285 -0.2324 -0.0846 -0.0037 0.0077 0.0077 -0.3111
-0.0599 -0.0719 0.0893 -0.1662 -0.1315 0.0762 -0.0893 -0.0596 -0.0179 -0.0354 -0.0678
-0.0665 -0.0447 0.0816 -0.2644 0.1050 -0.1772 -0.2007 -0.0008 -0.1028 -0.0008 -0.4602
0.0839 -0.0806 -0.0370 -0.3746 0.1536 -0.2055 -0.1369 0.3425 -0.0358 -0.3694 -0.4735
-0.0128 -0.0380 0.0662 -0.0654 -0.1262 -0.0590 -0.1235 -0.0193 -0.0188 -0.0358 -0.0693
0.1490 0.0437 -0.0382 -0.3397 -0.0798 -0.1967 -0.2804 -0.0045 -0.0045 -0.0045 -0.4630
26
Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09
0.4326 0.0526 0.3982 -0.1648 0.0907 -0.0185 0.0815 -0.0698 0.0148 -0.0643 -0.0668 -0.0005
-0.4263 0.1577 0.3060 0.1674 -0.0084 -0.0283 0.2723 0.0851 0.2300 0.1050 -0.0267 -0.0584
-0.0553 -0.1028 -0.4251 -0.3099 0.7952 -0.1580 -0.0502 -0.0052 0.1116 0.1981 -0.0261 0.1663
0.2511 -0.0184 -0.6157 0.0896 -0.0046 -0.0660 0.1024 -0.0877 -0.0521 0.3531 -0.1091 -0.0213
0.1006 -0.1170 0.0526 0.0175 0.0162 -0.0341 0.0819 0.0524 0.0021 0.0309 -0.0405 -0.0093
-0.4982 -0.3511 -0.0892 0.0256 0.0766 -0.2183 0.1810 -0.0835 0.0977 0.1800 -0.1410 0.0684
-0.3893 0.0858 0.0201 0.2007 -0.0059 0.0327 0.4328 -0.1752 0.0738 -0.0147 0.0789 -0.0488
-0.0370 -0.0389 -0.4939 -0.0910 -0.0563 -0.1402 -0.0510 0.1850 0.0793 -0.0598 -0.1900 0.0137
-0.2475 -0.0025 -0.0038 0.1697 -0.0532 -0.0071 0.1417 0.1423 0.0187 -0.0731 -0.0346 0.2569
-0.2059 -0.2195 0.3312 -0.1700 -0.0702 0.1287 -0.0131 -0.0224 0.0726 -0.0204 -0.0205 0.0178
-0.1437 0.1493 0.3441 0.2911 0.1254 -0.0503 0.0380 0.0486 0.1062 -0.0410 -0.0862 0.0089
-0.4725 -0.0740 0.1587 0.5279 -0.0341 -0.0499 -0.0472 -0.0777 0.1604 0.1476 -0.0166 -0.1447
-0.5124 -0.0515 0.1741 0.7043 -0.0389 -0.1723 0.5515 -0.1738 0.1838 0.0365 0.1432 -0.1237
-0.0584 -0.0584 -0.4694 0.1458 -0.0758 -0.0806 -0.0026 0.0089 0.0904 0.1062 0.3494 -0.0700
-0.0030 0.0484 0.2568 0.0558 0.0266 0.0401 0.0328 0.0888 0.0137 -0.0285 -0.0092 -0.0433
-0.4417 0.1142 0.2806 -0.0781 0.0185 -0.0081 0.0328 0.1205 0.0353 -0.0524 -0.0081 0.0180
0.2526 0.0989 -0.0678 0.4036 0.1311 -0.0594 0.0372 0.0305 0.2836 -0.1271 -0.0693 0.1146
0.1126 0.1818 0.2934 -0.1541 -0.0689 -0.0705 0.0170 0.0065 0.1774 -0.0259 -0.1282 0.0115
-0.5028 -0.1253 0.0720 1.3997 -0.2852 -0.1419 -0.1233 0.3214 -0.0454 -0.0204 -0.0843 -0.0655
0.1547 -0.1145 0.2703 0.0777 0.1148 0.0047 0.0491 0.0957 0.4853 -0.1039 0.0898 0.0393
0.1380 0.0810 0.1750 0.2756 -0.0191 0.0365 0.0902 0.1069 -0.0526 -0.0799 0.0329 0.0272
-0.0952 0.1892 0.2873 0.0091 0.0443 -0.0085 0.0907 0.2265 -0.0198 -0.0499 0.0120 0.0249
-0.1759 0.1486 0.3703 -0.0060 -0.4591 0.9246 0.0985 0.1997 0.0665 -0.0428 -0.0363 -0.0187
-0.1639 -0.1497 0.2002 -0.1177 -0.0170 -0.1150 0.0703 0.0673 0.0604 0.0822 0.0472 -0.0197
0.1865 -0.0212 0.1713 0.0620 0.0017 0.0123 0.2854 -0.0718 0.0142 -0.1128 -0.0987 0.0126
-0.4554 0.0051 0.1151 0.0068 -0.0011 -0.0087 0.1378 0.2869 -0.0442 -0.0035 -0.0593 -0.0082
0.1212 0.0225 0.4769 0.1568 0.0783 0.0900 0.0009 0.0328 0.0090 -0.1538 -0.0507 -0.0457
-0.2846 0.3061 0.0777 0.1100 -0.0366 -0.0767 0.0022 0.2376 0.0431 -0.0714 -0.0268 -0.0146
-0.1869 -0.0193 -0.2223 0.0474 0.1919 0.0313 0.0383 -0.0437 0.3273 -0.0132 -0.0701 -0.0860
-0.3224 0.1064 0.3484 0.0853 0.1187 0.1059 0.2214 -0.0813 0.0229 -0.1623 -0.0355 0.1525
27
STEP 5
In step 5 we found VARIANCE CO-VARIANCE MATRIX (Table 1.7), this matrix is found by multiplying the EXCESS MEAN
MATRIX to the TRANSPOSE EXCESS MEAN MATRIX, again this all work is done in the Excel Sheet. For this purpose we take
companies’ names in both rows and columns, and select the inner rows and columns first, than right after selecting we put the
formula in the very first cell on the selection cells divide it by 60, because we have companies’ data for the 60 months
(periods), in other words, it is divided by the number of periods( ) . The formula is as follows:
( , )
=
Right after one column we transpose Mean calculated in STEP 1 except mean value of the KSE 100 index as shown in the
following table:
28
TABLE 1.7
VARIANCE CO-
PKGS AGIL ATHL COLG ULEVER EFUL PSMC FZTM HABSM NESTLE ICI IGIIL INDU LAKST KOHE
PKGS 0.0194 0.0045 0.0001 -0.0011 0.0038 -0.0005 0.0021 0.0005 0.0041 0.0042 0.0085 0.0006 0.0023 -0.0008 0.0049
AGIL 0.0045 0.0222 -0.0006 -0.0005 0.0027 0.0042 0.0098 0.0032 0.0060 0.0033 0.0100 0.0082 0.0168 0.0014 0.0053
ATHL 0.0001 -0.0006 0.0271 0.0079 -0.0003 0.0071 -0.0023 0.0065 -0.0011 -0.0007 -0.0053 -0.0004 -0.0024 0.0014 -0.0025
COLG -0.0011 -0.0005 0.0079 0.0260 0.0014 0.0009 0.0025 0.0110 -0.0013 -0.0026 -0.0046 0.0002 0.0025 0.0073 -0.0024
ULEVER 0.0038 0.0027 -0.0003 0.0014 0.0032 0.0006 0.0020 0.0013 0.0017 0.0007 0.0032 0.0008 0.0032 0.0012 0.0019
EFUL -0.0005 0.0042 0.0071 0.0009 0.0006 0.0279 0.0076 -0.0015 0.0062 0.0035 0.0013 0.0156 0.0081 0.0035 -0.0013
PSMC 0.0021 0.0098 -0.0023 0.0025 0.0020 0.0076 0.0224 -0.0027 0.0047 0.0020 0.0065 0.0113 0.0186 0.0032 0.0009
FZTM 0.0005 0.0032 0.0065 0.0110 0.0013 -0.0015 -0.0027 0.0287 0.0022 -0.0031 -0.0004 -0.0039 -0.0004 0.0024 0.0005
HABSM 0.0041 0.0060 -0.0011 -0.0013 0.0017 0.0062 0.0047 0.0022 0.0175 -0.0002 0.0050 0.0053 0.0090 -0.0007 0.0035
NESTLE 0.0042 0.0033 -0.0007 -0.0026 0.0007 0.0035 0.0020 -0.0031 -0.0002 0.0125 0.0008 0.0069 0.0019 0.0023 0.0009
ICI 0.0085 0.0100 -0.0053 -0.0046 0.0032 0.0013 0.0065 -0.0004 0.0050 0.0008 0.0195 0.0046 0.0103 -0.0004 0.0063
IGIIL 0.0006 0.0082 -0.0004 0.0002 0.0008 0.0156 0.0113 -0.0039 0.0053 0.0069 0.0046 0.0308 0.0166 0.0013 -0.0001
INDU 0.0023 0.0168 -0.0024 0.0025 0.0032 0.0081 0.0186 -0.0004 0.0090 0.0019 0.0103 0.0166 0.0322 0.0048 0.0042
LAKST -0.0008 0.0014 0.0014 0.0073 0.0012 0.0035 0.0032 0.0024 -0.0007 0.0023 -0.0004 0.0013 0.0048 0.0232 0.0000
KOHE 0.0049 0.0053 -0.0025 -0.0024 0.0019 -0.0013 0.0009 0.0005 0.0035 0.0009 0.0063 -0.0001 0.0042 0.0000 0.0066
SHEL 0.0011 0.0064 0.0008 -0.0043 0.0008 0.0046 0.0041 -0.0006 0.0048 0.0032 0.0054 0.0046 0.0060 -0.0008 0.0036
MTL 0.0059 0.0041 0.0033 0.0027 0.0017 -0.0029 0.0042 0.0022 0.0032 -0.0017 0.0044 0.0034 0.0086 0.0022 0.0025
NBP 0.0122 0.0107 -0.0016 -0.0016 0.0039 0.0009 0.0078 0.0003 0.0030 0.0018 0.0129 0.0029 0.0069 0.0020 0.0052
RBS -0.0058 0.0108 -0.0106 -0.0005 0.0026 0.0064 0.0110 -0.0002 0.0091 -0.0025 0.0120 0.0191 0.0243 0.0065 0.0048
NML 0.0138 0.0107 0.0022 -0.0011 0.0045 0.0020 0.0056 0.0023 0.0068 0.0040 0.0113 0.0040 0.0114 0.0051 0.0062
HUBC 0.0074 0.0056 -0.0021 -0.0013 0.0028 -0.0018 0.0023 -0.0007 0.0034 -0.0009 0.0072 0.0012 0.0070 0.0016 0.0046
OGDC 0.0069 0.0093 -0.0010 -0.0049 0.0030 0.0007 0.0047 -0.0016 0.0042 0.0006 0.0113 0.0023 0.0063 -0.0006 0.0049
PSO 0.0070 0.0091 -0.0110 -0.0059 0.0022 -0.0023 0.0059 -0.0040 0.0040 0.0053 0.0104 0.0036 0.0054 -0.0016 0.0051
ABL 0.0090 0.0117 0.0006 -0.0006 0.0041 0.0038 0.0056 0.0045 0.0052 0.0029 0.0095 0.0037 0.0104 0.0036 0.0048
FCCL 0.0093 0.0081 -0.0023 0.0012 0.0034 -0.0002 0.0062 0.0019 0.0023 0.0008 0.0104 0.0001 0.0096 0.0006 0.0045
PAKT 0.0024 0.0083 0.0011 -0.0005 0.0011 0.0023 0.0038 0.0066 0.0058 0.0015 0.0064 0.0019 0.0085 0.0042 0.0066
NRL 0.0095 0.0072 -0.0026 -0.0031 0.0033 -0.0039 0.0034 -0.0011 0.0016 0.0020 0.0097 0.0018 0.0073 -0.0033 0.0048
MCB 0.0074 0.0118 -0.0006 -0.0021 0.0019 0.0026 0.0083 0.0019 0.0049 0.0019 0.0124 0.0035 0.0092 0.0047 0.0041
SIEM 0.0018 0.0085 0.0052 0.0042 0.0014 0.0025 0.0030 0.0091 0.0042 -0.0005 0.0042 0.0031 0.0064 0.0058 0.0028
DGKC 0.0106 0.0125 -0.0008 -0.0041 0.0027 0.0046 0.0114 -0.0001 0.0064 0.0041 0.0151 0.0060 0.0151 -0.0004 0.0055
29
VARIANCE MATRIX MEAN

SHEL MTL NBP RBS NML HUBC OGDC PSO ABL FCCL PAKT NRL MCB SIEM DGKC
0.0011 0.0059 0.0122 -0.0058 0.0138 0.0074 0.0069 0.0070 0.0090 0.0093 0.0024 0.0095 0.0074 0.0018 0.0106 0.00468
0.0064 0.0041 0.0107 0.0108 0.0107 0.0056 0.0093 0.0091 0.0117 0.0081 0.0083 0.0072 0.0118 0.0085 0.0125 0.01291
0.0008 0.0033 -0.0016 -0.0106 0.0022 -0.0021 -0.0010 -0.0110 0.0006 -0.0023 0.0011 -0.0026 -0.0006 0.0052 -0.0008 0.00535
-0.0043 0.0027 -0.0016 -0.0005 -0.0011 -0.0013 -0.0049 -0.0059 -0.0006 0.0012 -0.0005 -0.0031 -0.0021 0.0042 -0.0041 0.01840
0.0008 0.0017 0.0039 0.0026 0.0045 0.0028 0.0030 0.0022 0.0041 0.0034 0.0011 0.0033 0.0019 0.0014 0.0027 0.00911
0.0046 -0.0029 0.0009 0.0064 0.0020 -0.0018 0.0007 -0.0023 0.0038 -0.0002 0.0023 -0.0039 0.0026 0.0025 0.0046 0.01163
0.0041 0.0042 0.0078 0.0110 0.0056 0.0023 0.0047 0.0059 0.0056 0.0062 0.0038 0.0034 0.0083 0.0030 0.0114 0.00359
-0.0006 0.0022 0.0003 -0.0002 0.0023 -0.0007 -0.0016 -0.0040 0.0045 0.0019 0.0066 -0.0011 0.0019 0.0091 -0.0001 0.03893
0.0048 0.0032 0.0030 0.0091 0.0068 0.0034 0.0042 0.0040 0.0052 0.0023 0.0058 0.0016 0.0049 0.0042 0.0064 0.00597
0.0032 -0.0017 0.0018 -0.0025 0.0040 -0.0009 0.0006 0.0053 0.0029 0.0008 0.0015 0.0020 0.0019 -0.0005 0.0041 0.02045
0.0054 0.0044 0.0129 0.0120 0.0113 0.0072 0.0113 0.0104 0.0095 0.0104 0.0064 0.0097 0.0124 0.0042 0.0151 0.02053
0.0046 0.0034 0.0029 0.0191 0.0040 0.0012 0.0023 0.0036 0.0037 0.0001 0.0019 0.0018 0.0035 0.0031 0.0060 -0.00190
0.0060 0.0086 0.0069 0.0243 0.0114 0.0070 0.0063 0.0054 0.0104 0.0096 0.0085 0.0073 0.0092 0.0064 0.0151 0.02612
-0.0008 0.0022 0.0020 0.0065 0.0051 0.0016 -0.0006 -0.0016 0.0036 0.0006 0.0042 -0.0033 0.0047 0.0058 -0.0004 0.00845
0.0036 0.0025 0.0052 0.0048 0.0062 0.0046 0.0049 0.0051 0.0048 0.0045 0.0066 0.0048 0.0041 0.0028 0.0055 0.00304
0.0141 -0.0019 0.0035 0.0061 0.0037 0.0015 0.0049 0.0060 0.0035 0.0019 0.0073 0.0038 0.0042 0.0008 0.0066 -0.00423
-0.0019 0.0189 0.0065 0.0104 0.0098 0.0063 0.0020 0.0003 0.0023 0.0056 0.0007 0.0055 0.0057 0.0037 0.0061 0.01566
0.0035 0.0065 0.0251 0.0043 0.0178 0.0080 0.0149 0.0132 0.0165 0.0125 0.0045 0.0135 0.0164 0.0056 0.0164 0.01163
0.0061 0.0104 0.0043 0.0641 0.0054 0.0098 0.0056 0.0034 0.0081 0.0044 0.0075 0.0071 0.0110 0.0015 0.0067 0.02242
0.0037 0.0098 0.0178 0.0054 0.0257 0.0089 0.0111 0.0103 0.0144 0.0113 0.0067 0.0125 0.0141 0.0083 0.0157 0.01171
0.0015 0.0063 0.0080 0.0098 0.0089 0.0099 0.0071 0.0077 0.0068 0.0061 0.0040 0.0080 0.0060 0.0020 0.0075 0.00467
0.0049 0.0020 0.0149 0.0056 0.0111 0.0071 0.0158 0.0123 0.0102 0.0081 0.0058 0.0109 0.0117 0.0031 0.0121 0.01481
0.0060 0.0003 0.0132 0.0034 0.0103 0.0077 0.0123 0.0330 0.0091 0.0082 0.0056 0.0116 0.0107 0.0011 0.0143 0.01570
0.0035 0.0023 0.0165 0.0081 0.0144 0.0068 0.0102 0.0091 0.0212 0.0103 0.0068 0.0087 0.0129 0.0051 0.0140 -0.00582
0.0019 0.0056 0.0125 0.0044 0.0113 0.0061 0.0081 0.0082 0.0103 0.0160 0.0036 0.0097 0.0084 0.0035 0.0140 -0.00773
0.0073 0.0007 0.0045 0.0075 0.0067 0.0040 0.0058 0.0056 0.0068 0.0036 0.0179 0.0035 0.0082 0.0083 0.0080 0.01786
0.0038 0.0055 0.0135 0.0071 0.0125 0.0080 0.0109 0.0116 0.0087 0.0097 0.0035 0.0194 0.0091 0.0020 0.0120 0.00082
0.0042 0.0057 0.0164 0.0110 0.0141 0.0060 0.0117 0.0107 0.0129 0.0084 0.0082 0.0091 0.0253 0.0052 0.0152 0.03578
0.0008 0.0037 0.0056 0.0015 0.0083 0.0020 0.0031 0.0011 0.0051 0.0035 0.0083 0.0020 0.0052 0.0144 0.0052 0.01930
0.0066 0.0061 0.0164 0.0067 0.0157 0.0075 0.0121 0.0143 0.0140 0.0140 0.0080 0.0120 0.0152 0.0052 0.0239 0.00454
30
STEP 6
In this step we have find out the value of the portfolio 1 by the utilization of Z-portfolio and “R-C” term which means Return
minus Constant. In this case, so called case 1, we assumed constant is equals to zero “0” and Return minus constant is founded
by the mean values in the table 1.7 above and less from the constant zero as presented in the following table. For this purpose
we are also limiting the “0” constant cell to calculate the 30 firms values. Value of Z-portfolio is founded by the following
formula in excel sheet:
= ( ( ), )
You just have to put this formula after selecting 30 cells in single column after that sum of the Z-portfolio is given. Value of the
portfolio-1 is founded by the following formula:
TABLE 1.8
CASE 1 WHEN CONSTANT IS ZERO 0
R-C Z- PORTFOLIO PORTFOLIO 1

0.004681497 1.116978595 0.156971099
0.012906474 -3.309086158 -0.46503209
0.005352262 0.437768439 0.061520421
0.018402502 0.314718994 0.044228051
0.009106275 3.518350463 0.494440396
0.011632658 2.054109469 0.28866786
0.003588357 -3.211061911 -0.451256558
0.038928783 2.078216733 0.292055699
0.005968823 -0.874054022 -0.122832453
31
0.020445324 6.791466307 0.95441751

0.020533615 1.929043663 0.271092127
-0.001904196 -4.663270659 -0.65533818
0.026123457 7.790698258 1.094841452
0.008451477 -2.446279738 -0.343780284
0.003039734 -1.375109869 -0.193246771
-0.004233404 -1.287463965 -0.180929728
0.015664065 0.430477755 0.060495847
0.011631823 4.861479657 0.683192863
0.022424032 0.724219272 0.101775894
0.011709819 -2.753165871 -0.386907568
0.004669181 0.579318271 0.081412684
0.014812956 1.932324657 0.271553212
0.015697909 1.51138498 0.212397769
-0.005820139 -4.445160963 -0.624686815
-0.00772678 -3.659660461 -0.514298955
0.017859634 -0.696779688 -0.097919758
0.000815135 -2.554337049 -0.358965781
0.035780062 2.631391762 0.369794424
0.019302278 2.636753752 0.370547955
0.004544633 -2.947447422 -0.414210319
SUM 7.115823251 1
32
STEP 7
In this step we have find out the value of the portfolio 2 by the utilization of Z-portfolio and “R-C” term which means Return
minus Constant. In this case, so called case 2, we take constant is no equals to zero i.e. 1-year T-rate calculated in the table 1.2
and Return minus constant (R-C) is founded by the mean values in the table 1.7 above and less the constant from the mean as
presented in the following table. For this purpose we are also limiting the constant cell to calculate the 30 firms’ values. Value
of Z-portfolio is founded by the following formula in excel sheet:
= ( ( ), )
You just have to put this formula after selecting 30 cells in single column after that sum of the Z-portfolio is given. Value of the
portfolio-1 is founded by the following formula:
TABLE 1.9
CASE 2 WHEN CONSTANT IS NOT ZERO 0.101234
R-C Z-PORTFOLIO 2
-0.096552503 10.99729515 -0.147572228
-0.088327526 4.092065112 -0.054911245
-0.095881738 -2.84086574 0.038121455
-0.082831498 -1.318675666 0.017695252
-0.092127725 -20.86894669 0.280039493
-0.089601342 -0.85424426 0.011463067
-0.097645643 -9.008307842 0.120882093
-0.062305217 -1.70726804 0.022909756
-0.095265177 -5.121831953 0.068729641
33
-0.080788676 -8.736628081 0.117236434

-0.080700385 1.825735403 -0.024499464
-0.103138196 -5.817638529 0.07806664
-0.075110543 12.05661466 -0.161787191
-0.092782523 -3.580141541 0.048041765
-0.098194266 -20.17296901 0.270700199
-0.105467404 -7.371782387 0.098921629
-0.085569935 -5.414461883 0.07265643
-0.089602177 8.462776601 -0.113561633
-0.078809968 4.196165675 -0.056308166
-0.089524181 9.257278983 -0.124223026
-0.096564819 -15.17271285 0.203601978
-0.086421044 -0.928869044 0.012464454
-0.085536091 1.950919499 -0.026179304
-0.107054139 -4.613116273 0.061903208
-0.10896078 -9.053132383 0.121483592
-0.083374366 8.189792508 -0.109898471
-0.100418865 -5.114949946 0.068637292
-0.065453938 -4.270529847 0.057306055
-0.081931722 -5.184821754 0.069574899
-0.096689367 1.601808672 -0.021494601
sum -74.52144145 1
34
STEP 8
After the calculations of the Portfolio-1 and Portfolio-2, we transpose (rows to columns) the values of the both portfolios, as
presented in the table 2.0. The formula used for the transpose is again same as implemented in other matrix in order to
transpose.
= ( )
Similarly portfolio-2’s values are transposed, as presented in the following table.
TABLE 2.0
TRANSPOSE
PORTFOLIO 1 0.1569711 -0.4650321 0.0615204 0.0442281 0.4944404 0.2886679 -0.4512566 0.2920557 -0.1228325 0.9544175 0.2710921 -0.6553382 1.0948415
PORTFOLIO 2 -0.1475722 -0.0549112 0.0381215 0.0176953 0.2800395 0.0114631 0.1208821 0.0229098 0.0687296 0.1172364 -0.0244995 0.0780666 -0.1617872
CONTINUED TABLE 2.0

OF PORTFOLIOS
-0.3437803 -0.1932468 -0.1809297 0.0604958 0.6831929 0.1017759 -0.3869076 0.0814127 0.2715532 0.2123978 -0.6246868 -0.5142990 -0.0979198 -0.3589658
0.0480418 0.2707002 0.0989216 0.0726564 -0.1135616 -0.0563082 -0.1242230 0.2036020 0.0124645 -0.0261793 0.0619032 0.1214836 -0.1098985 0.0686373
CONTI NUED TABLE
0.3697944 0.3705480 -0.4142103
0.0573061 0.0695749 -0.0214946
35
STEP 9
Calculation of Markowitz Efficient Frontier, we find out in this table (2.1), in it in the rows of the table we have taken Mean,
Variance, Standard Deviation, Covariance, and Correlation.
Formulas for finding out the different variables are as follows:
= ( 1 2.0, 1.7)
= ( 1 2.0, )
= ( )
= ( ( 1 2.0, 1.7), 2 1.9)
=
1 2
Similarly for portolio 2 we do put all the above formulas in the excel sheet.
TABLE 2.1
CALCULATION OF MARKOWITZ EFFICIENT FRONTIER
PORTFOLIO 1 PORTFOLIO 2
MEAN 0.103407739 -0.000207564
VARIANCE 0.0006579 0.001295634
ST. DEVIATION 0.025649554 0.035994914
COVARIATION -0.0000291693
CORRELATION -0.031594035
36
STEP 9.1
Finding the proportions of the portfolios as just saying as the portfolio consists of 30% and 70% weights. So by putting the
formula:
= 1 .1 + 2 .2
= ( 1 1 + 2 2 +2 1 2 1 2
TABLE 2.2
PROPORTION OF PORTFOLIO 1 W1= 0.3
MEAN 0.030877027
VARIANCE 0.00068182
ST. DEVIATION 0.026111692
37
STEP 9.2
To make the graph of the Markowitz Efficient Frontier, we drive the following table from the mean and standard deviation
from the above table 2.2 and from the data analysis we do “what if” analysis for this purpose and we have the following table
and from the following table we drive scatter diagram Figure 1.1
TABLE 2.3
ST. DEVATION MEAN
0.026111692 0.030877027
0.1 0.032415921 0.010153967
0.2 0.029089302 0.020515497
0.3 0.026111692 0.030877027
0.4 0.023615479 0.041238557
0.5 0.021766918 0.051600087
0.6 0.020739914 0.061961618
0.7 0.020657366 0.072323148
0.8 0.02153014 0.082684678
0.9 0.023250904 0.093046208
1 0.025649554 0.103407739
1.1 0.028555772 0.113769269
1.2 0.031830835 0.124130799
1.3 0.035372439 0.134492329
1.4 0.039108238 0.144853859
1.5 0.042987633 0.15521539
1.6 0.04697506 0.16557692
38
0.18
0.16
0.14
0.12
0.1
0.08 Seri es1
0.06
0.04
0.02
0
0 0.01 0.02 0.03 0.04 0.05
STEP 10
In this step we calculate the Capital Asset Pricing Model (CAPM), for this purpose we require mean and standard deviation
from table 1.4.
TABLE 2.4
STOCKS BETA MEAN
RFR 0 0.1012
PKGS 0.848389138 0.004681497
AGIL 0.995324933 0.012906474
ATHL -0.050884116 0.005352262
COLG -0.263653632 0.018402502
ULEVER 0.315985466 0.009106275
EFUL 0.286965564 0.011632658
PSMC 0.616309225 0.003588357
FZTM 0.058327994 0.038928783
39
HABSM 0.49062381 0.005968823
NESTLE 0.224620947 0.020445324
ICI 1.084765052 0.020533615
IGIIL 0.413369326 -0.0019042
INDU 0.903619832 0.026123457
LAKST 0.189576537 0.008451477
KOHE 0.477201322 0.003039734
SHEL 0.462538158 -0.0042334
MTL 0.380559397 0.015664065
NBP 1.472779008 0.011631823
RBS 0.718565447 0.022424032
NML 1.316424959 0.011709819
HUBC 0.684184262 0.004669181
OGDC 1.228327062 0.014812956
PSO 1.096861341 0.015697909
ABL 1.185739474 -0.00582014
FCCL 0.906483974 -0.00772678
PAKT 0.664253634 0.017859634
NRL 1.037189367 0.000815135
MCB 1.265376326 0.035780062
SIEM 0.476646346 0.019302278
DGKC 1.338754692 0.004544633
40
After having the table, the next step is to calculate the regression for this. Regression calculated by the “Data Analysis” tool pack by taking mean
from the table 2.4 in y-axis and standard deviation from the same table in x-axis. The resulted figures are shown below.
SML GRAPH
0.12
0.1
0.08
MEAN
0.06
0.04
0.02
0
-0.5 -0.02 0 0.5 1 1.5 2
BETA
TABLE 2.5
Regression Statistics
Multiple R 0.261629
R Square 0.06845
Adjusted R Square 0.036327
Standard Error 0.019131
Observations 31
TABLE 2.6
df SS MS F Significance F
Regression 1 0.00078 0.00078 2.130904 0.155104
Residual 29 0.010614 0.000366
Total 30 0.011394
41
TABLE 2.7
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 0.02179 0.006133 3.55276 0.001327 0.009246 0.034334 0.009246 0.034334
X Variable 1 -0.01104 0.007563 -1.45976 0.155104 -0.02651 0.004428 -0.02651 0.004428
TABLE 2.8
RESIDUAL OUTPUT PROBABILITY OUTPUT
Observation Predicted Y Residuals Standard Residuals Percentile Y
1 0.02179 0.07941 4.221801 1.612903 -0.00773
2 0.012424 -0.00774 -0.41163 4.83871 -0.00582
3 0.010802 0.002104 0.111882 8.064516 -0.00423
4 0.022352 -0.017 -0.90377 11.29032 -0.0019
5 0.024701 -0.0063 -0.33484 14.51613 0.000815
6 0.018302 -0.0092 -0.48887 17.74194 0.00304
7 0.018622 -0.00699 -0.37159 20.96774 0.003588
8 0.014986 -0.0114 -0.60596 24.19355 0.004545
9 0.021146 0.017783 0.945411 27.41935 0.004669
10 0.016374 -0.0104 -0.55317 30.64516 0.004681
11 0.01931 0.001135 0.060345 33.87097 0.005352
12 0.009815 0.010719 0.569869 37.09677 0.005969
13 0.017227 -0.01913 -1.01708 40.32258 0.008451
14 0.011814 0.014309 0.760734 43.54839 0.009106
15 0.019697 -0.01125 -0.59787 46.77419 0.011632
16 0.016522 -0.01348 -0.71677 50 0.011633
17 0.016684 -0.02092 -1.11205 53.22581 0.01171
18 0.017589 -0.00192 -0.10233 56.45161 0.012906
19 0.005531 0.006101 0.324339 59.67742 0.014813
20 0.013857 0.008567 0.455445 62.90323 0.015664
21 0.007257 0.004453 0.23672 66.12903 0.015698
22 0.014237 -0.00957 -0.50866 69.35484 0.01786
23 0.00823 0.006583 0.349991 72.58065 0.018403
42
24 0.009681 0.006017 0.31988 75.80645 0.019302
25 0.0087 -0.01452 -0.77195 79.03226 0.020445
26 0.011783 -0.01951 -1.03722 82.25806 0.020534
27 0.014457 0.003403 0.180904 85.48387 0.022424
28 0.01034 -0.00952 -0.50638 88.70968 0.026123
29 0.007821 0.027959 1.486443 91.93548 0.03578
30 0.016528 0.002774 0.147492 95.16129 0.038929
31 0.007011 -0.00247 -0.13111 98.3871 0.1012
STEP 11
In this step we just go for evaluation of the securities that which securities are under priced and which securities are over
priced by taking in comparison the mean (estimated mean) that was find out in the table 1.4 with the Required rate of return
of the securities that was found by implementation of regression statistics. In the regression statistics predicted Y is the
required rate of return. From which we came to know about the securities that were under priced or securities that were over
priced. In the last column we identify the decision regarding securities that which securities to hold and which securities to
sell.
TABLE 2.9
STOCKS RRR=PREDICTED Y Estimated return Valuing Decision
PKGS 1.2424% 0.4681% over priced sell
AGIL 1.0802% 1.2906% under priced buy
ATHL 2.2352% 0.5352% over priced sell
COLG 2.4701% 1.8403% over priced sell
ULEVER 1.8302% 0.9106% over priced sell
EFUL 1.8622% 1.1633% over priced sell
PSMC 1.4986% 0.3588% over priced sell
FZTM 2.1146% 3.8929% under priced buy
HABSM 1.6374% 0.5969% over priced sell
43
NESTLE 1.9310% 2.0445% under priced buy
ICI 0.9815% 2.0534% under priced buy
IGIIL 1.7227% -0.1904% over priced sell
INDU 1.1814% 2.6123% under priced buy
LAKST 1.9697% 0.8451% over priced sell
KOHE 1.6522% 0.3040% over priced sell
SHEL 1.6684% -0.4233% over priced sell
MTL 1.7589% 1.5664% over priced sell
NBP 0.5531% 1.1632% under priced buy
RBS 1.3857% 2.2424% under priced buy
NML 0.7257% 1.1710% under priced buy
HUBC 1.4237% 0.4669% over priced sell
OGDC 0.8230% 1.4813% under priced buy
PSO 0.9681% 1.5698% under priced buy
ABL 0.8700% -0.5820% over priced sell
FCCL 1.1783% -0.7727% over priced sell
PAKT 1.4457% 1.7860% under priced buy
NRL 1.0340% 0.0815% over priced sell
MCB 0.7821% 3.5780% under priced buy
SIEM 1.6528% 1.9302% under priced buy
DGKC 0.7011% 0.4545% over priced sell
In the above table it is quite clear that 17 securities are overpriced and 13 securities are under priced so we recommend
selling the 17 securities and buying and holding the 13 securities.
44

Significance of Capital Asset Pricing Model: Gift University

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GIFT UNIVERSITY

SIGNIFICANCE OF CAPITAL ASSET

INVESTMENT ANALYSIS & PORTFOLIO MANAGEMENT

MR. ASIM ILYAS

M. MOBASHAR ALI 08117032

MBA (Banking & Finance)

TABLE 1.1 (NAMES OF THE COMPANIES)

ABL ALFLAH BANK LTD.

FCCL FAUJI CEMENT

PSMC PAK SUZUKI MOTORS

4. CALCULATIONS & FINDINGS

TABLE 1.5 (CONT.)

TABLE 1.6 (CONT.)

VARIANCE MATRIX MEAN

R-C Z- PORTFOLIO PORTFOLIO 1

0.020445324 6.791466307 0.95441751

-0.080788676 -8.736628081 0.117236434

CONTINUED TABLE 2.0

CONTI NUED TABLE

0.3697944 0.3705480 -0.4142103

0.0573061 0.0695749 -0.0214946

= ( ( 1 2.0, 1.7), 2 1.9)

ST. DEVIATION 0.025649554 0.035994914

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