The Lahore Journal
of Business

The Lahore Journal
of Business

Lahore Journal of Business

(HEC recognized journal in “Y” category)

The Lahore Journal of Business is aimed at providing a specialized forum for dissemination of qualitative and quantitative research in various areas of business administration. The LJB invites researchers, policy makers and analysts to submit original theoretical and empirical papers that explore and contribute to the understanding of various areas in the business domain. The Journal aims at bringing together state-of-art research findings, particularly from emerging markets, in various business disciplines including (but not limited to) accounting, banking, management, marketing, finance, investments, human resource management and organizational behavior.

Abdul Qadeer and Ashfaq Ahmad
The Lahore Journal of Business, Volume 10, Issue 1, Apr-Sep 2021, pages 91-120, https://doi.org/10.35536/ljb.2021.i1.v10.a4

Using the Fama-French three factor method, the size sorted liquidity-based three factor method, and the Fama-French five factor model, this study explores the dynamics of price discovery and asset pricing in sustainable equity portfolios. Based on the findings of the study, we propose the liquidity based three factor model as a significant explanatory model for the pricing of sustainable equity portfolios in Pakistan. However, all the five factors i.e., market premium, size premium, value premium, operating profitability, and the investment factors from the Fama French five factor regression for small conservative and small stocks with high Book-to-Market were observed to be significant. Furthermore, we found evidence of the price discovery variable in some portfolio classes that were constructed from the asset pricing models. The findings of this study suggest that in Pakistan, liquidity is a critical pricing factor, and should not be overlooked while making investment decisions. Furthermore, portfolios where price discovery were found may be useful for further portfolio optimization and profit maximization.