Ownership Concentration and Cross-Autocorrelation in Portfolio Returns

Abstract

This study investigates cross-autocorrelation in portfolio returns which are formed on the basis of ownership concentration. The study randomly selected seventy-two firms that are listed at the Karachi Stock Exchange. Eight portfolios were formed based on ownership concentration, with each portfolio comprising of nine firms. Equally-weighted daily and weekly returns were calculated for these portfolios. Vector Auto-Regressive (VAR) and Auto-Regressive Conditional Heteroskedasticity (ARCH) models were employed to analyze the cross-autocorrelation among the portfolio returns. The results revealed that portfolios having higher concentration of ownership lead the returns of portfolio having lower concentration of ownership. The lead-lag relationship was found in daily returns for up to three days only. No evidence was found for lead-lag pattern in weakly returns