Forecasting the Stock Market through Dart Board Theory

Faiz Muhammad Shaikh, Abdul Latif, Anwar Ali Shah, Muhammad Suhail Nazar

Abstract


This research instigates the forecasting the Stock by using the Dart Board theory which is one of the famous theories of them is “Dart Board Theory of Stock Selection”: you can select a stock by throwing a dart at the Wall Street Journal and probability of your success is more than others who follow expert’s advice. This paper evaluates that significant factor behind the success of dart board theory is Chain Reaction in stock’s prices. The data of 30 stocks selected from KSE 100 index (stocks cover about 50-60 percent of total market volume) is arranged in four sub-categories according to their weights assigned in KSE 100 index respectively. The stock’s price moves are measured in percentage and arranged from single day to four months Result indicate that Cat: I stocks have dominant effect on stocks’ prices of Cat: II and III and causes them to move along.  The value of pros/expert recommendation is also measured, based on comparative analysis of change in mutual funds earning with change in average KSE 100 index. Results also support chain reaction concept; as positive correlation exist between performance of KSE 100 index and mutual funds earnings. Findings also indicate that pros recommendations are keys to start a chain reaction.


Full Text: PDF DOI: 10.5539/ijef.v3n4p106

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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