Browsing by Author "Pathirawasam, C."

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Determinants of dividend policy in Sri Lanka:An empirical study of selected listed companies in Colombo Stock Exchange
(2010) Pathirawasam, C.
Does the Colombo Stock Exchange Overreact?
(University of Kelaniya, 2006) Pathirawasam, C.
The efficient markets hypothesis has been the central theme in finance for nearly 35 years. Fama (1970) defined an efficient financial market as one in which security prices fully reflect the available information. However behavioralists such as Daniel, Hirshleifer and Subrahmayam (1998) Barberies, shleifer and Visny (1998), argue that financial markets are not efficient due to two investor biases These are over reaction and under reaction. De Bondt and Thaler (1985) have written several papers in which they argue that investors over react New York Stock Exchange. Particularly they find that stocks that are the most extreme losers in the past 3 – 5 year period have abnormally high returns in the subsequent 3 – 5 year period and vice versa. Hence they argue that investors over react for the extremely good news and extremely bad news. Objective of this study is to test whether the long term overreaction hypothesis is predictive in the Colombo Stock Exchange. This study uses monthly return data of common stocks for Colombo Stock Exchange for the period between January 1993 to December 2005. De Bondt and Thaler define the over reaction hypothesis as (~ | ) 0 1 < Wt t− E u F and (~ | ) 0 1 > Lt t− E u F . The first term explains that residual returns of high returns portfolio formed conditional upon the information set at t-1 are negative and the second term explains that residual returns of low returns portfolio formed conditional upon the information set at t-1 are positive. In this study t period has been taken as 24 months and 36 months. The residuals are estimated as it jt mt U~ = R − R . There is no risk adjustment except for movement of the market as a whole and the adjustment is identical for all the stocks. For every stock j cumulative excess returns (CUj) are computed for the prior 36 months and formed in to 5 portfolios. The highest CU portfolio is named as the Winner and the lowest CU portfolio as Loser. Then, for both Winner and Loser next 36 months Cumulative Abnormal Returns (CAR) are computed. If a security’s return is missing more than 80% of the months with in a period that security is removed from the portfolio and the CARs in order to handle the thin trading problem. Findings of the study shows that past period losers are mostly generating positive returns in the subsequent 36 months and only 10 months show significant returns. However prior period winners reflect on average positive returns also in the next period and all of these returns are statistically significant after the 25th month. Therefore it can be concluded that there is no long term over reaction to new information at the Colombo Stock Exchange.
An Empirical Study on Day of the Week Effect; Evidence from Colombo Stock Exchange
(University of Kelaniya, 2006) Fernando, P.N.D.; Pathirawasam, C.
Seasonalities in security market returns have been extensively documented. Among the different seasonal effects observed in stock markets, an interesting one is the seasonality across days of the week. Fields (1991) observed that the US stock market consistently experienced significant negative and positive returns on Mondays and Fridays respectively. This matter was further tested in 1980’s (French, 1980; Gibbons and Hess 1981, Lakonishok and Levi 1982). The capital markets of many other countries also experience the similar seasonality (Jaffe and Westerfield 1985, peiro 1994, Agarwal and Tando 1994). This day of the week effect is a sharp contrast to the efficient market hypothesis. This study examines the day of the week effect in the Colombo Stock Exchange using the All Share Price Index (ASPI) and the Milanka Price Index (MPI). The study covers the period from 1985 to 2004. We compute the returns of the above market indexes as daily price relatives and log returns are taken for the study. To estimate day of the week effect in return, we use the ordinary least square (OLS) equation. In the equation index returns are taken as the dependent variable and five dummy variables are inserted as independent variables from Monday to Friday. We estimate the day of the week effect for the total sample period and revealed that there is no any significant day of the week effect in the total period. Then we analyzed the day of the week effect in five year sub samples and results are similar to the total sample period except in the last sub sample that is from 2000 to 2004. In the last sub sample there is a statistically significant Friday effect and for other days, returns are not significant.
Financial Literacy and Credit Choice of Consumer Credit Users in Sri Lanka
(Faculty of Commerce and Management Studies, University of Kelaniya, 2015) Lasantha, S.A.R.; Pathirawasam, C.
Financial literacy of individuals matters in credit decisions specially when choosing among different credit alternatives. This study investigates the financial literacy level of consumer credit users in Sri Lanka and their credit choice. For this purpose primary data was collected from 445 individuals using a survey instrument. Individuals have displayed a moderate level of financial literacy and it is found that there is no significant difference between the financial literacy levels of males and females. Despite the financial literacy level, most individuals have resorted to high cost credit cards compared to low cost bank borrowings. This may imply a behavior that deviate from the rationality. It demands further research to determine the possible factors affecting the deviation from rationality. Further this research finds that individuals below the age of 25 have lower financial literacy level. It may imply that they are susceptible to higher credit related risks.
January Effect in the .Japanese Stock Market
(University of Kelaniya, 2007) Pathirawasam, C.
Extensive research finds that returns in January are substantially higher than returns in other months and this pattern of stock returns is known as the "January Effect". The January Effect has been studied in developed as well as developing stock markets. Gultekin and Gultekin ( 1983) studies January return patterns in 17 countries including the United States and finds that for all the countries January returns are higher than other months. Kato and Shallheim (1985) examine excess returns in January for the Tokyo Stock Exchange (TSE). They use both Tokyo Price Index and Nikkei 225 from 1952 to 1980 for the study. W.M Gunaratne Bandara (200 1) finds that January Effect is not evident in the Colombo Stock Exchange. Objective of this study is to test whether the January Effect documented by the Kato and Shallheim ( 1985) is alive in the TSE. This study uses monthly return data of Nikkei 225 for the period from January 1950 to August 2007. To test the January effect, the following regression equation is used. 17. R, =a,+ LfJ,D; + v; { .. /. Where, a" is January average returns. D, is a Dummy variable for month i (February to December) and v; is an identically and independently distributed error term. The estimate of each fJ; represent the average difference in January and other months. The null hypothesis tested is that a" = 0 and fJ; = 0, that is there is no January effect. Findings of the test reveal that January average returns are positive and statistically significant and average differences in January returns from the other months (each other month returns minus January returns) are also negative and statistically significant for the total sample period from 1950 to 2007. However sub sample analysis shows more important evidences than the total sample. Positive January returns are statistically significant and average differences in January returns form the other months are also negative and those are statistically significant for half of the months for the sub samples of 1950 to 1964 and 1965 to 1981. This pattern has changed in the sub sample 1982 to 1995 and 1996 to 2007. In the both sub samples January returns are not statistically significant. In the sub sample 1982 to 1995 December returns slightly higher than the January returns. In the last sub sample average returns of March, June and November are higher than the January returns. Therefore it can be concluded that January anomaly has vanished in the Japanese market after 1980s.
Market Anomalies, Assets Pricing Models and Stock Return: Evidence from Colombo Stock Exchange
(Faculty of Commerce and Management Studies University of Kelaniya., 2024-11-01) Jayasinghe, J.A.G.P.; Pathirawasam, C.
Exploring the factors determining stock prices and returns is an everlasting aspiration in the financial world. This research study aims to discover factors determining the stock return using market anomalies and asset pricing models for the Colombo Stock Exchange. The research relied upon secondary data obtained from the Colombo Stock Exchange data library and the relevant accounting data are taken from published annual reports of respective listed companies. The sample includes all common stocks except the financial sector quoted on the Colombo Stock Exchange for at least five years between 2010 and 2023. Hypothesis testing will be used to identify market anomalies, and an asset pricing model will be tested using the detected anomalies with regression analysis. It is expected to present the best asset pricing model for Sri Lankan stocks to capture the cross sections of stock returns by incorporating the existing anomalies into the basic capital asset pricing model. The conclusions of this study will be useful to all parties interested in the stock market. This study is focused solely on risk variables and the Colombo Stock Exchange.
The Monday effect in common stock returns: The international evidence
(University of Kelaniya, 2009) Pathirawasam, C.
Personal and Situational Factors on Consumer Financing Decisions, a Conceptual Model
(Department of Commerce and Financial Management, University of Kelaniya, 2017) Lasantha, S.A.R.; Pathirawasam, C.
Expected Utility Theory advocates that individuals make rational decisions. However it is not rare to see consumers deviate from rationality when making consumer credit decisions. Despite the financial literacy, individuals may tend to choose high cost consumer credit forms such as credit card as a mean of financing consumer goods and services which in fact suggests a deviation from economic rationality. The failure of Expected Utility Theory to explain and predict consumer credit decisions that deviate from rationality provide incentives to use an alternate theory; Prospect Theory which counts principles of perceptions and judgement that limit the rationality of choice. Accordingly this theoretical paper suggests personal factors; locus of control, social comparison and self-control and situational factors; life events and income may influence on consumer financing decisions.