• Dr. Muhammad Farhan Assistant Professor PN School of Logistics, Karachi, Pakistan
  • Prof. Dr. Gobind M. Herani Rector, Denning Institute of Technology and Entrepreneurship Karachi, Pakistan
  • Dr. Lata R. Lohana Assistant Professor Indus University, Karachi, Pakistan


Small and Medium-Sized Enterprises, PSX, Firm Size, Market Structure


This paper investigates the profitability of investing in small and medium-sized companies in Pakistan's stock market. Recent studies have found a significant impact of firms' size on stock market price. This study investigates the effect of firm size on companies listed on the Pakistan Stock Exchange, as the price of small-cap stocks should represent the firm's profitability. Stock performance in January and July plays a key role in the relationship between firm size and stock price appreciation. The study uses Thomson Reuters DataStream data, first released in January 2007, and gives investors access to previously inaccessible market data. This data includes monthly updates on the closing prices of business stocks, the value of the KSE-100 indexes, and the size of the Market. Under the Panel data techniques, a fixed-effects model is used to investigate the relationship. The findings of this paper suggest a link between company size and stock performance. The study finds the negative impact of the size of a firm on Stock Market Performance in the Pakistani stock market. This suggests that investors place a higher value on small-cap enterprises. The study found comparable results in many previous studies. The main contribution of this paper is to provide an understanding of how firm size affects stock in Pakistan's stock market. Unlike previous studies, rather than analyzing each company individually, the study uses aggregate monthly data on excess stock returns from more than 300 to grasp the size premium precisely.


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How to Cite

Farhan, M., Herani, G. M., & Lohana, L. R. (2023). INVESTIGATING THE RELATIONSHIP BETWEEN STOCK RETURNS AND MARKET CAPITALIZATION. Journal of Research in Economics and Finance Management, 2(2), 45–59. Retrieved from