STOCK PRICE BEHAVIOR OF LISTED INSURANCE COMPANIES IN NEPAL

Abstract

The objective of the study is to determine the stock price behavior of listed insurance companies in Nepal based on firm specific financial indicators and macroeconomic variables such as EPS, return on equity, dividend payout, market to book value and PE and inflation rate, GDP rate, interest rate as independent variables. Out of 12 listed life and non-life insurance companies, three life and 2 non-life listed companies have been selected for the fiscal year 2070/71 to 2079/80. The study applies descriptive and casual comparative research design focusing on purposive sampling model. Financial tool and statistical tools are used as research methodology to find the result showing the relationship between the dependent variable (stock price per share) and independent variables that are financial and macroeconomic indicators. The CAPM analysis shows ALIC to be underpriced. The correlation results shows that MPS have positive or negative relationship with many of the variables selected as well as relationship amongst the variables. MPS have negative relationship with ROE, EPS, inflation, interest rate and GDP while it shows statistically significant positive relationship with dividend per share. Furthermore, the regression model explains that the adjusted R-squared value is significant which cumulatively explained major portion of variation arising due to predictors. It also shows the fitness of applying the model for analysis with the F-significance value which is significantly. This means that the model represents to be fairly fitted model. The results of analysis answer the research questions and effectively achieve the main objective of the study. This study has many implications for investors, policy makers, financial analysts and researchers for further research in the similar field to identify the investment opportunities, to maintain a stable economy and to refine their models and provide more accurate stock price predictions.