Common Shares Performance Evaluation for Companies Listed at Amman Stock Exchange

Mohammad Al-Shiab, Ali Al-Alawneh

Abstract


In this paper an attempt was made to evaluate empirically the common stock performance for companies listed on Amman Stock Exchange (ASE) by adopting the security market line (SML) approach. The study used 82 of Jordanian Companies listed on Amman Stock Exchange (ASE), one of the emerging markets, and observed the monthly returns of these firms over the period January1996-August 2004. After adopting the Augmented Dickey-Fuller Unit Root for testing the stationarity assumption, the study revealed that companies listed on ASE seem, on average, being over priced. In addition, it could be strongly argued that banking sector had the best performance, where its prices were under priced. The insurance sector, on the other hand, had the worst performance and its prices in general were over priced. The study, therefore, supports the hypothesis that companies listed on ASE common stocks’ prices were not fairly priced. From the point view of the investors, market inefficiency seems to have existed and making abnormal profit is fairly possible and consequently ASE efficiency is questionable.


Keywords


Security Market Line; Common Shares; Performance Evaluation; Portfolio Management

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