Options and Risk Involved in Different Companies Stocks

PROJECT
TO DEVELOP AN ACCEPTABLE RESEARCH PAPER
COURSE TITLE
RESEARCH METHODOLOGY
RESEARCH TOPIC
OPTIONS AND RISK INVOLVED IN

DIFFERENT OMPANIES STOCKS
SUBMITTED TO
Dr. Waheed
SUBMITTED BY
Ahsan Raza CIIT/FA08-MBA-009/LHR
Muhammad Asif CIIT/FA08-MBA-073/LHR
Faisal Mushtaq CIIT/FA08-MBA-077/LHR
Rizwan Ahmad Sardar CIIT/FA08-MBA-121/LHR
BATCH 11 SECTION A
DATED December 17, 2009
1
OPTIONS AND RISK INVOLVED IN
DIFFERENT COMPANIES STOCKS
2
ACKNOWLEDGEMENTS
First of all, we are thankful to Almighty Allah, who has given us the strength
and determination to carry out this research.
We are thankful to:
• Dr. Waheed Akhter
Without him we cannot develop our Research Paper
We are also thankful to:
• Mr. ILyas Broker

• Mr. Asad Broker
For their help and cooperation
3
ABSTRACT
There are three stock exchanges in Pakistan. These are Karachi Stock
Exchange, Lahore Stock Exchange and Islamabad Stock Exchange. Hundred
of companies related to different sectors are register in it. An investor can sell
or purchase shares of any company through registered brokers of the Stock
Exchanges. Despite there is recession in the world but Investors still look for
the safe investments. They want to invest their idle money or savings in
different stocks of companies. So it becomes important to study factors that
would affect their Investment decision. But the problem is that investment in
stocks is more risky than any other investment. So investors sometimes face
very serious loss instead of profit but it also gives higher returns so investors
want to invest in it. To collect data we use quantitative method. We develop a
questionnaire and fill it from our sample. The sample consists of 50 groups
and in each group there are 5 investors. Our research finds that investors first
see return on that stock, then company’s performance of that stock and at the
end risk. The research shows that in Pakistan 82% investors are male and
18% are female and 58% investors have education of master level. Our
research concludes that aggressive policy of investors is the key reason of
loss in investment. We recommend that investors should diversify the risk by
making portfolio. They should also invest in foreign exchanges to minimize
country risk. They should carefully see the company profile, companies
going on projects, stock performance and products or business type.
Investors should also take broker valuable advice before investing in any
company stock.
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CONTENTS
SR. NO. DESCRIPTION PAGE NO.
ACKNOWLEDGEMENTS III
ABSTRACT IV
1 INTRODUCYION 1
Significance of Study 1
Focus of Study 2
Problem Statement 2
Objectives 2
Limitation of the Study 2
2 LITERATURE REVIEW 3
A Brief Literature Survey 3
Theoretical Framework 6
Research Questions 7
Hypothesis 7
3 RESEARCH DESIGN 8
Purpose of Study 8
Type of Investigation 8
Extent of Researcher Interference 8
Study Setting 8
Measurement of variables 8
Unit of Analysis 12
Sampling Design 12
Time Horizon 12
Data Collection Procedure 13
Data Analysis Techniques 14
4 DATA ANALYSIS 15
5 KEY FINDINGS 41
CONCLUSION 42
RECOMMENDATIONS 42
REFERENCES 43
GLOSSARY 45
APPENDIX 46
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INTRODUCTION
There are three stock exchanges in Pakistan. These are Karachi Stock
Exchange, Lahore Stock Exchange and Islamabad Stock Exchange. Hundred
of companies are listed in each exchange. The companies are registered in
their particular sector. For example Lucky Cement, Pioneer, D.G. Cement are
registered under Cement Sector. Pel, Siemens Pakistan is registered under
Cable and Electrical Goods Sector. A company can register in all the stock
exchanges or in any stock exchange. The buying and selling of the shares of
all the public companies are held in these stock exchanges. If a person want
to purchase a stock of any listed company he simply go in the stock exchange
and open ODC Account with 5000 Pakistani Rupees then through broker he
can purchase any company stock and if he want to sell it he can sell the share
through the broker. The normal timings of Pakistani Stock Exchanges is Am to
3 Pm. On Saturday and Sunday no trading is held in these stock exchanges.
There are many registered brokers of the stock exchange through which
investors sell or purchase shares of the companies and they charge
commission on it.
SIGNIFICANCE OF STUDY
Despite there is recession in the world but Investors still look for the safe
investments. They want to increase their money or earnings to meet their
financial and other needs. For that purpose they invest their idle money or
savings in different options e.g. in land, in stocks or shares of companies,
deposit in saving or P & L sharing account. So it becomes important to study
factors that would affect their Investment decision.
FOCUS OF THE STUDY

The focus of our study is Investment Decision. In Stock Exchange, many
stock options are available for investment. An investor can choose stocks of
different companies so we focus on how different investors make decision in
which company’s stocks they will invest their money.
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PROBLEM STATEMENT
The problem is that investment in stocks is more risky than any other
investment. There are several factors which can affect the stock price. So
investors sometimes face very serious loss instead of profit but it also gives
higher returns so investors want to invest in it. Then problem arise how, when,
how much and in which companies stock they invest so that their money
remain save at the end and they get from this investment more than other
alternative investments.
OBJECTIVES
The objective of this study is to see the reasons due to which investors face
loss and explore the factors which affect investment decision for the help of
new investors so that when they want to invest in stocks what factors they
must see and to give them recommendations so that they can get high returns
with minimum risk.
LIMITATION OF THE STUDY

There are so many different kinds of investment. You can invest in property,
gold, can run their own business and can Invest in money market instruments
such as in T. bills so the limitation of our study is that it is helpful for the
investors who invest in companies stock. It explores the reasons of loss in
investment in stocks only and gives recommendations to stock investors to
over come loss and risk.
LITERATURE REVIEW
A BRIEF LITERATURE SURVEY
Schiffres (1994) has identified that the stock performance was hurt due to
increase in interest rate. Because due to increase in interest rate the actual
value of the stocks decrease. Another cause of poor performance of the stock
is an imminent decline in electricity demand from large customers.
7
Wang, Stark and Tritch (1994) have identified that in America a Money
magazine conduct the poll to get the knowledge about the savings of the
American’s families for tier after retirements. This poll indicates that only half
of the required income after the retirement. But, they have well managed
programs for the investments in stocks and most attractive portfolios. And
they have well constructed plans which can give the 15% more incomes.
Belsky (1995) has identified that when the stock market as appears
overvalued then investing in stock to earn dividend is a good strategy. He also
identified that each stock have addition advantages.
Mitchell, Leander and Nuelle (1995) have identified that due to collaboration
between CEOs and CFOs the stocks go to fastest growing. It was also found
that:
” CEOs delegate the management of investor-relations

staff communication with the investment community,
preparation of investment community presentations and
targeting of new investors to their CFOs. The most
significant lessons learned
by CFOs from their CEOs were that it is necessary to

clarify the company strategy, to be consistent, and to
relate strategic planning to stock performance and to
assess the long-term effect of strategic planning.”
Mitchell and Leander (1995) have identified that in 1994, top ten companies
were selected to conduct a survey. In this survey Chief executive are the
respondents, and the survey was about the stock price growth. Was this
growth being made by the Chief executives to reward the shareholders,
attract and retain the employees, improve the cost of capital, provide the cash
for growth, or to attract the customers? They gave the answer that they were
just struggling to communicate the vision and long term strategy of the
8
companies not only internally but also externally. And, increase in the stock
price is the end result of all these efforts.
Goldberg (1996) has identified that:
“A sound long-term investment strategy is to buy shares of

growth companies at regular intervals, which is possible
through dividend reinvestment plans. Six hallmarks of a good
growth company include consistent earnings growth and low
debt.”
National Education Association of the United States (1997) has identified that:
“Investment in stocks generally has a higher rate of

return, but you risk losing money. Bond funds are
generally riskier than money market funds but less risky
than stock funds. Investing in mutual funds has
advantages over investments in stock and bond funds.
Though they do not have as high rate of return as stocks
and bonds, they are much less financially risky because
investments in these funds are reinvested in diverse types
of securities that serve as a hedge for volatile or
fluctuating market conditions. Mutual funds also have an
advantage over savings accounts in that they have higher
rates of investment returns. “
Schonfeld and Atanason (1997) has identified that if people conduct careful
analysis of the company’s product and management then it investing in stocks
of that companies such as bio technology companies can prove to be a
profitable investment.
Goldberg (1997) has identified that to make concentrated funds; the portfolios
are made only with favorite stocks. The investor sees that stocks which have
big growth and give them steady gains so they invest in small companies
stock.
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Wang and Fried (1997) has identified some tips how to invest in stocks.
These understand risk, buying shares in diversified funds, buying bond funds
and having short term savings.
Gerlach (1998) has identified that much information is available on the

internet about the stock market. There are many sites which are great place to
research potential investments. The site provides information on stocks and
mutual funds, including performance of the funds and brief company profits.
The other advantage is that online brokerages takes take commission as law
as $ 8 per trade and provides, stocks quotes, free research and charts.
Beside all these there are other personal finance software packages that
make easy to use internet to updates stock and fund prices.
THEORETICAL FRAMEWORK
The dependent variable Investment decision is influenced by the three

independent variables _ Returns, Risk and Company’s Performance. The
independent variables are also interrelated as explained below;
A return has direct impact on Investment decision. There are so many

companies that are listed in stock exchanges. The stocks of these companies
are buying and selling daily. If investor feels that returns on this stock are
higher than other ones on the basis of previous returns and future
expectations, he make decision to purchase it. It means that the stock which
gives higher returns investor invest his amount in it.
Risk has adversely impact on Investment decision. The stock which has lower
risk investor invests their amount in it.
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Company’s Performance has direct impact on Investment decision. If
company performance is good then investor will willing to invest his amount in
the stock of that company.
Company performance also affects returns. If company performance is good

and operate well then he makes more profit and so returns are higher. These
relationships are schematically diagramed in figure.
In sum Returns, Risk and Company performance significantly influence

Investment decision.
Figure
Returns
Risk Investment Decision
Company Performance
Independent Variables Dependent Variables
RESEARCH QUESTIONS
 What is the reason of loss in investment in stocks?

 Which things an investor see before investing in stocks?
 How investors manage the risk?
 What is the education level of the investors?
 What is the ranking of the variables (return, risk and company’s
performance) of investment decision according to the importance of
investors?
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HYPOTHESES
1- If a stock has more returns then more investors invest money in it.
2- If a stock has more risk then fewer investors invest money in it.
3- If the Company’s Performance is good then more investors invest
money in it.
RESEARCH DESIGN
PURPOSE OF STUDY
Our purpose of study is to describe the variables and explore the
reasons of loss in investment. So we conduct both descriptive and
exploratory research.
TYPE OF INVESTIGATION
Correlation is our type of investigation. We want to check the
relationship of independent variable and dependent variable and see
up to what extent they correlate.
EXTENT OF RESEARCHER INTERFERENCE

We use natural environment for our research. We take the real
environment of stock exchange so researcher interference is minimal.
STUDY SETTING
Our study setting is non – contrived means we take natural settings of
the stock exchange. We not interfere in the working of stock exchange.
MEASUREMENT OF VARIABLES
For the measurement of the variables we use 5 point interval scale
however to know the demographics of the sample we use nominal
scale and for the ranking of the variables we use ordinal scale.
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OPERATIONALIZING THE CONCEPT OF COMPANY
PERFORMANCE
Company performance means that the overall performance of the

company at the time of investment based on the past data and future
expectations. To measure the concept we use two dimensions and
these are:
1- Financial performance 2- Competitiveness
The elements of the financial performance are:
a- Earning per share of the company which tells that how much
company has given return on per unit of share
b- Other is Return on investment which tells if a investor will invest in

that company then how much return it will give the investor
The elements of the competitiveness are:
a- Relative market share means share of the products a company

captured in market
b- Sales growth means the growth rate of the sale of the product
COMPANY PERFORMANCE
Financial Performance Competitiveness
Check earning per share Check relative market share
Check return on equity Check sales growth
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OPERATIONALIZING THE CONCEPT OF RISK
Risk means that variation or change in the expected and actual returns
on the investment. We use two dimensions to measure risk.
1- Country situation 2- Market situation
The elements of the Country Situation are Political Condition and

Economic Condition Where as the elements of the market situation are
overall market condition and demand & supply of stock.
RISK
Country situation Market situation
Political Condition Overall Market Condition
Economic Condition Demand & supply of stocks
OPERATIONALIZING THE CONCEPT OF RETURN
Returns mean anything extra or additional on the amount of

investment. To measure the concept we use two dimensions and these
are:
1-cost 2- time
The elements of the cost are transaction cost and brokerage fee where
as the elements of time are investing period and when to buy.
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RETURN
Cost Time
Transaction cost Investing period
Brokerage fee Know when to buy
OPERATIONALIZING THE CONCEPT OF INVESTMENT
DECISION
Investment decision mean means that you take the decision in which
company’s stock you like to invest his amount or which company; stock
you want to buy. To measure the concept we use two dimensions and
these are:
1- Objective 2- Complete information
The elements of the Objective are which approach is follow and return
& risk level where as the elements of the complete information are
aware about stock prices and dividend paid.
INVESTMENT DECISION
Objective Complete information
Which approach follows Know stock prices
Risk & Return level Know dividend paid
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UNIT OF ANALYSIS
Our unit of analysis is group and each group consist of five investors.
Population size (N)

The population is investors.
SAMPLING DESIGN
We use Non-Probability Sampling and in it we use convenience
sampling because it is convenient to us and our time and cost save.
Sample size (n)

The sample size is 50 groups and there are 5 investors in each group.
TIME HORIZON
Our research is Cross – Sectional study means one time study. It has
no intervals.
DATA COLLECTION PROCEDURE

For collection of data we use quantitative method. We develop a
questionnaire. Then we test its validity through face validity.
First we conduct pilot testing. In pilot testing we go in Lahore stock

exchange. In pilot testing our unit of analysis is individual investor. But
we face difficulty in it because when we go in the stock exchange we
find that in stock exchange there are many private companies which
deals in stocks. These are the companies in which brokers are
working. So in one office only one individual fill the questionnaire as the
representative of all. Other individual also see the questionnaire and
16
give their suggestions to him. In pilot testing two member of our group
go in the stock exchange.
After pilot testing we change our unit of analysis and we take unit of
analysis of group of 5 individual. So to fill the questionnaire we all the
members personally go in Lahore stock exchange. We not take any
permission from the university because there is no need of it. We make
two groups of two members each and start fill questionnaire. One
group starts to fill questionnaire from the ground floor and one start
from the upper most floor. One by one we go in every office and
introduce themselves and tell them we come from COMSATS, Lahore
campus and also tell them we are doing MBA and our specialization is
in finance and our Sir Dr. Waheed give us a project to make a research
paper and our research topic is Options & risk involved in different
companies stock in which we see the reasons due to which investors
face loss and explore the factors which affect investment decision for
the help of new investors so that when they want to invest in stocks
which factors they must see and to give them recommendations so that
they can get high returns with minimum risk.
We fill questionnaire by different companies such as
 M/S. KHALID JAVED SECURITIES (PVT.) LTD. Room No.620

 M/S. STOCK MASTER SECURITIES (PVT.) LTD. Room No. M-10,
 M/S. MAZHAR HUSSAIN SECURITIES (PVT.) LTD. Room No.219
 M/S. MILLENNIUM BROKERAGE (SMC-PVT) LTD. Room No. M-2,
 M/S. MAAN SECURITIES (PVT.) LTD. Room No.611
 M/S. AL-HAQ SECURITIES (PVT.) LTD. Room No.405, 407
 M/S. CAPITAL VISION SECURITIES (PVT.) LTD. Room No.505
 M/S. F.M. SECURITIES (PVT.) LTD. Room No.419
 M/S. SAFE SECURITIES (PVT.) LTD. Room No.514
17
DATA ANALYSIS TECHNIQUES
We will analyze the data through Descriptive analysis and in it we use
mean, Standard deviation, range, minimum, maximum, frequency,
percentages and pie charts.
DATA ANALYSIS
DEMOGRAPHICS
Age
Valid Cumulative
Frequency Percent Percent Percent
Valid Between 20 to 30 years 35 70.0 70.0 70.0
Between 30 to 40 years 13 26.0 26.0 96.0
above 40 years 2 4.0 4.0 100.0
Total 50 100.0 100.0
Age
between 20 to 30 years
between 30 to 40 years
above 40 years
Pies show counts
35 groups in our research are of age between 20 to 30 years and they are 70
percent of total sample of 50 groups and in pie chart this portion is shown by
red colour. 13 groups are of age between 30 to 40 years and they are 26
18
blue colour. Only 2 groups are of age above 40 years and they are only 4
green colour.
Gender
Frequency Percent Valid Percent Cumulative Percent
Valid male 41 82.0 82.0 82.0
female 9 18.0 18.0 100.0
Total 50 100.0 100.0
Gender
male
female
Pies show counts
41 groups in our research are male and they are 82 percent of total sample of
50 groups and in pie chart this portion is shown by red colour. Only 9 groups
in our research are female and they are 18 percent of total sample of 50
groups and in pie chart this portion is shown by blue colour.
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Education
Vali inter level 3 6.0 6.0 6.0

d bachelor level 14 28.0 28.0 34.0
master level 29 58.0 58.0 92.0
above master level 2 4.0 4.0 96.0
other 2 4.0 4.0 100.0
Total 50 100.0 100.0
Education
inter level
bachelor level
master level
above master level
other
Pies show counts
Only 3 groups in our research have education of inter level and they are 6
red colour. 14 groups have education of bachelor level and they are 28
blue colour. 29 groups have education of master level and they are 58 percent
of total sample of 50 groups and in pie chart this portion is shown by light
green colour. Only 2 groups have education of above master level and they
are 4 percent of total sample of 50 groups and in pie chart this portion is
shown by purple colour. Only groups in our research have other education
and they are 4 percent of total sample of 50 groups and in pie chart this
portion is shown by pink colour.
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RANKING
Return
Valid first 21 42.0 42.0 42.0
second 17 34.0 34.0 76.0
third 12 24.0 24.0 100.0
Total 50 100.0 100.0
RETURN
Return
first
second
third
Pies show counts
In our research, out of 50 groups 21 groups see returns first on that stock
while making investment decision. They are 42 percent of total and in pie
chart this portion is shown by red colour. Out of 50 groups 17 groups see
returns second on that stock while making investment decision. They are 34
percent of total and in pie chart this portion is shown by blue colour. Out of 50
groups 12 groups see returns third on that stock while making investment
decision. They are 24 percent of total and in pie chart this portion is shown by
green colour.
21
Risk
Cumulative
Frequency Percent Valid Percent Percent
Valid first 16 32.0 32.0 32.0
second 11 22.0 22.0 54.0
third 23 46.0 46.0 100.0
Total 50 100.0 100.0
RISK
Risk
first
second
third
Pies show counts
In our research, out of 50 groups 16 groups see risk first on that stock while
making investment decision. They are 32 percent of total and in pie chart this
portion is shown by red colour. Out of 50 groups 11 groups see risk second
on that stock while making investment decision. They are 22 percent of total
and in pie chart this portion is shown by blue colour.
Out of 50 groups 23 groups see risk third on that stock while making
investment decision. They are 46 percent of total and in pie chart this portion
is shown by green colour.
22
Performance
Valid first 13 26.0 26.0 26.0
second 22 44.0 44.0 70.0
third 15 30.0 30.0 100.0
Total 50 100.0 100.0
COMPANY PERFORMANCE
Company Performance
first
second
third
Pies show counts
In our research, out of 50 groups 13 groups see company’s performance first

on that stock while making investment decision. They are 26 percent of total
and in pie chart this portion is shown by red colour. Out of 50 groups 22
groups see company’s performance second on that stock while making
investment decision. They are 44percent of total and in pie chart this portion is
shown by blue colour. Out of 50 groups 15 groups see company’s
performance third on that stock while making investment decision. They are
22 percent of total and in pie chart this portion is shown by green colour. So
by see returns, risk and company’s performance frequencies our research
rank these variables of investment decision as:
1 Returns
2 Company’s Performance
3 Risk
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INDEPENDENT VARIABLE COMPAQNY’S PERFORMANCE
These four statements measure independent variable Company’s
Performance
Descriptive Statistics
N Range Minimum Maximum Mean Std. Deviation
Earning per share 50 3.00 2.00 5.00 4.4400 .67491
Return on equity 50 3.00 2.00 5.00 4.4000 .72843
Relative market share 50 4.00 1.00 5.00 3.6600 1.18855
Sales growth 50 3.00 2.00 5.00 3.9600 .90260
Valid N (list wise) 50
In Earning per share statement, the mean is 4.44 which shows tendency
towards strongly agreement with the statement and a small standard deviation
of .67491. The minimum value a group is selected is 2 that shows
disagreement with the statement and maximum value is 5 that shows strongly
agreement with the statement so the range is 3. In Return on equity, the mean
is 4.4 which shows tendency towards strongly agreement with the statement
and a small standard deviation of .72843. The minimum value a group is
selected is 2 that shows disagreement with the statement and maximum value
is 5 that shows strongly agreement with the statement so the range is 3. In
Relative market growth statement, the mean is 3.66 which shows tendency
towards strongly agreement with the statement and a high standard deviation
of 1.18855. The minimum value a group is selected is 1 that shows strongly
disagreement with the statement and maximum value is 5 that shows strongly
agreement with the statement so the range is 4. In Sales growth statement,
the mean is 3.96 which shows tendency towards agreement with the
statement and a standard deviation of .90260. The minimum value a group is
selected is 2 that shows disagreement with the statement and maximum value
is 5 that shows strongly agreement with the statement so the range is 3.
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Frequency Tables
Earning per share

Valid D 1 2.0 2.0 2.0
N 2 4.0 4.0 6.0
A 21 42.0 42.0 48.0
SA 26 52.0 52.0 100.0
Total 50 100.0 100.0
Earning
D per share
N
A
SA
Pies show counts
In our research 1 group is disagree with the statement and it is 2 percent of

total groups of 50 and this portion is shown in pie chart with red colour. 2
groups are neutral with the statement and it is 4 percent of total groups of 50
and this portion is shown in pie chart with blue colour. 21 group is agree with
the statement and it is 42 percent of total groups of 50 and this portion is
shown in pie chart with green colour.26 groups are strongly agree with the
statement and it is 52 percent of total groups of 50 and this portion is shown in
pie chart with purple colour.
25
Return on equity
Cumulative
Frequency Percent Valid Percent Percent
Valid D 1 2.0 2.0 2.0
N 4 8.0 8.0 10.0
A 19 38.0 38.0 48.0
SA 26 52.0 52.0 100.0
Total 50 100.0 100.0
Pies show counts

Return
D on equity
N
A
SA

and this portion is shown in pie chart with blue colour. 19 groups are agree
with the statement and it is 38 percent of total groups of 50 and this portion is
26
Relative market share
Valid SD 1 2.0 2.0 2.0
D 12 24.0 24.0 26.0
N 4 8.0 8.0 34.0
A 19 38.0 38.0 72.0
SA 14 28.0 28.0 100.0
Total 50 100.0 100.0
Relative market share

SD
D
N
A
SA
Pies show counts
In our research 1 group is strongly disagree with the statement and it is 2

percent of total groups of 50 and this portion is shown in pie chart with red
colour. 12 groups are disagreeing with the statement and it is 24 percent of
total groups of 50 and this portion is shown in pie chart with blue colour. 4
and this portion is shown in pie chart with green colour. 19 groups are
agreeing with the statement and it is 38 percent of total groups of 50 and this
portion is shown in pie chart with purple colour. 14 groups are strongly agreed
shown in pie chart with pink colour.
27
Sales growth
Valid D 5 10.0 10.0 10.0
N 6 12.0 12.0 22.0
A 25 50.0 50.0 72.0
SA 14 28.0 28.0 100.0
Total 50 100.0 100.0
Sales
D growth
N
A
SA
Pies show counts
In our research 5 groups are disagree with the statement and it is10 percent
of total groups of 50 and this portion is shown in pie chart with red colour. 6
INDEPENDENT VARIABLE RISK

These four statements measure independent variable Risk.
28
Political condition 50 4.00 1.00 5.00 3.9800 .99980
Economic condition 50 3.00 2.00 5.00 4.1000 .95298
Overall market condition 50 3.00 2.00 5.00 3.7800 1.01599
Demand & supply of stock 50 3.00 2.00 5.00 4.1200 1.02300
Valid N (listwise) 50
In political condition statement, the mean is 3.98 which shows tendency

towards agreement with the statement and a standard deviation of .99980.
The minimum value a group selected is 1 that shows strongly disagreement
with the statement and maximum value is 5 that show strongly agreement
with the statement so the range is 4. In economic condition statement, the
mean is 4.1 which shows tendency towards strongly agreement with the
statement and a standard deviation of .95298. The minimum value a group
selected is 2 that shows disagreement with the statement and maximum
value is 5 that shows strongly agreement with the statement so the range is
3. In overall market condition statement, the mean is 3.78 which shows
tendency towards agreement with the statement and a high standard
deviation of 1.01599. The minimum value a group selected is 2 that shows
disagreement with the statement and maximum value is 5 that shows
strongly agreement with the statement so the range is 3. In demand & supply
of stocks statement, the mean is 4.12 which shows tendency towards strongly
agreement with the statement and a high standard deviation of 1.023. The
minimum value a group selected is 2 that shows disagreement with the
statement and maximum value is 5 that shows strongly agreement with the
statement so the range is 3.
Frequency Tables
29
Political condition
Valid SD 1 2.0 2.0 2.0
D 4 8.0 8.0 10.0
N 7 14.0 14.0 24.0
A 21 42.0 42.0 66.0
SA 17 34.0 34.0 100.0
Total 50 100.0 100.0
Political condition
SD
D
N
A
SA
Pies show counts

colour. 4 groups are disagree with the statement and it is 8 percent of total
groups of 50 and this portion is shown in pie chart with blue colour. 7 groups
are neutral with the statement and it is 14 percent of total groups of 50 and
this portion is shown in pie chart with green colour. 21 groups are agreeing
shown in pie chart with purple colour. 17 groups are strongly agreed with the
30
Economic condition
Valid D 6 12.0 12.0 12.0
N 2 4.0 4.0 16.0
A 23 46.0 46.0 62.0
SA 19 38.0 38.0 100.0
Total 50 100.0 100.0
Economic
D condition
N
A
SA
Pies show counts
In our research 6 groups are disagree with the statement and it is 12 percent
statement and it is 38percent of total groups of 50 and this portion is shown in
31
Overall market condition
Valid D 8 16.0 16.0 16.0
N 8 16.0 16.0 32.0
A 21 42.0 42.0 74.0
SA 13 26.0 26.0 100.0
Total 50 100.0 100.0
Overall
D market condition
N
A
SA
Pies show counts
32
Demand & supply of stock
Valid D 7 14.0 14.0 14.0
N 2 4.0 4.0 18.0
A 19 38.0 38.0 56.0
SA 22 44.0 44.0 100.0
Total 50 100.0 100.0
Demand
D & supply of stock
N
A
SA
Pies show counts
INDEPENDENT VARIABLE RETURNS
33
These four statements measure independent variable Returns.
Transaction cost 50 3.00 2.00 5.00 3.4200 1.10823
Brokerage fee 50 4.00 1.00 5.00 3.2200 1.20017
Investing period 50 3.00 2.00 5.00 4.2800 .80913
Under value stock 50 4.00 1.00 5.00 3.4400 1.24802
In transaction cost statement, the mean is 3.42 which shows tendency

towards agreement with the statement and a high standard deviation of
1.10823. The minimum value a group selected is 2 that shows disagreement
with the statement and maximum value is 5 that shows strongly agreement
with the statement so the range is 3. In brokerage fee statement, the mean is
3.22 which shows tendency towards agreement with the statement and a high
standard deviation of 1.20017. The minimum value a group selected is 1 that
shows strongly disagreement with the statement and maximum value is 5 that
show strongly agreement with the statement so the range is 4. In investing
period statement, the mean is 4.28 which shows tendency towards strongly
agreement with the statement and a standard deviation of 80913. The
statement so the range is 3. In under value stock period statement, the mean
is 3.44 which shows tendency towards agreement with the statement and a
high standard deviation of 1.24802 The minimum value a group selected is
1 that shows strongly disagreement with the statement and maximum value
is 5 that shows strongly agreement with the statement so the range is 4.
Frequency Tables
34
Transaction cost
Valid D 15 30.0 30.0 30.0
N 8 16.0 16.0 46.0
A 18 36.0 36.0 82.0
SA 9 18.0 18.0 100.0
Total 50 100.0 100.0
Transaction
D cost
N
A
SA
Pies show counts
of total groups of 50 and this portion is shown in pie chart with red colour.8
35
Brokerage fee
Valid SD 3 6.0 6.0 6.0
D 14 28.0 28.0 34.0
N 10 20.0 20.0 54.0
A 15 30.0 30.0 84.0
SA 8 16.0 16.0 100.0
Total 50 100.0 100.0
Brokerage fee
SD
D
N
A
SA
Pies show counts
In our research 3 groups are strongly disagree with the statement and it is 6
colour. 14 groups are disagreeing with the statement and it is 28 percent of
total groups of 50 and this portion is shown in pie chart with blue colour. 10
and this portion is shown in pie chart with green colour. 15 groups are agree
shown in pie chart with purple colour. 8 groups are strongly agree with the
pie chart with pink colour.
36
Investing period
Valid D 2 4.0 4.0 4.0
N 5 10.0 10.0 14.0
A 20 40.0 40.0 54.0
SA 23 46.0 46.0 100.0
Total 50 100.0 100.0
Investing
D period
N
A
SA
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In our research 2 groups are disagree with the statement and it is 4 percent of
37
Under value stock
Valid SD 4 8.0 8.0 8.0
D 10 20.0 20.0 28.0
N 6 12.0 12.0 40.0
A 20 40.0 40.0 80.0
SA 10 20.0 20.0 100.0
Total 50 100.0 100.0
Under value stock

SD
D
N
A
SA
Pies show counts
are neutral with the statement and it is 12 percent of total groups of 50 and
this portion is shown in pie chart with green colour. 20 groups are agree with
the statement and it is 40 percent of total groups of 50 and this portion is
shown in pie chart with purple colour. 10 groups are strongly agree with the
pie chart with pink colour.
DEPENDENT VARIABLE INVESTMENT DECISION
38
These four statements measure dependent variable Investment decision.
Approach 50 3.00 2.00 5.00 4.4800 .78870
Risk & return level 50 3.00 2.00 5.00 4.1800 .69076
Stock prices known 50 4.00 1.00 5.00 3.9400 1.13227
Known dividend paid 50 4.00 1.00 5.00 4.2000 .80812
In approach statement, the mean is 4.48 which shows tendency towards

strong agreement with the statement and a standard deviation of .7887. The
statement so the range is 3. In risk & return level statement, the mean is 4.18
which shows tendency towards strong agreement with the statement and a
standard deviation of .69076. The minimum value a group selected is 2 that
shows disagreement with the statement and maximum value is 5 that shows
strongly agreement with the statement so the range is 3. In stock prices
known statement, the mean is 3.94 which shows tendency towards
agreement with the statement and a high standard deviation of 1.13227. The
minimum value a group selected is 1 that shows strongly disagreement with
the statement and maximum value is 5 that shows strongly agreement with
the statement so the range is 4. In known dividend paid statement, the mean
is 4.2 which shows tendency towards strong agreement with the statement
and a standard deviation of .80812. The minimum value a group selected is 1
that shows strongly disagreement with the statement and maximum value is 5
that shows strongly agreement with the statement so the range is 4.
Frequency Tables
39
Approach
Valid D 2 4.0 4.0 4.0
N 3 6.0 6.0 10.0
A 14 28.0 28.0 38.0
SA 31 62.0 62.0 100.0
Total 50 100.0 100.0
Approach
D
N
A
SA
Pies show counts
In our research 2 groups are disagree with the statement and it is 4 percent of
total groups of 50 and this portion is shown in pie chart with red colour.3
40
Risk & return level
Valid D 1 2.0 2.0 2.0
N 5 10.0 10.0 12.0
A 28 56.0 56.0 68.0
SA 16 32.0 32.0 100.0
Total 50 100.0 100.0
Risk
D & return level
N
A
SA
Pies show counts

41
Stock prices known
Valid SD 2 4.0 4.0 4.0
D 6 12.0 12.0 16.0
N 3 6.0 6.0 22.0
A 21 42.0 42.0 64.0
SA 18 36.0 36.0 100.0
Total 50 100.0 100.0
Stock prices known

SD
D
N
A
SA
Pies show counts
are neutral with the statement and it is 6 percent of total groups of 50 and this
portion is shown in pie chart with green colour. 21 groups are agree with the
pie chart with purple colour. 18 groups are strongly agree with the statement
and it is 36 percent of total groups of 50 and this portion is shown in pie chart
with pink colour.
42
Known dividend paid
Valid SD 1 2.0 2.0 2.0
D 1 2.0 2.0 4.0
N 3 6.0 6.0 10.0
A 27 54.0 54.0 64.0
SA 18 36.0 36.0 100.0
Total 50 100.0 100.0
Known dividend paid

SD
D
N
A
SA
Pies show counts

colour. 1 group is disagree with the statement and it is 2 percent of total
are neutral with the statement and it is 6 percent of total groups of 50 and this
portion is shown in pie chart with green colour. 27 groups are agree with the
pie chart with purple colour. 18 groups are strongly agree with the statement
and it is 36 percent of total groups of 50 and this portion is shown in pie chart
with pink colour.
KEY FINDINGS
43
Our research finds that
 The investors having age between 20 to 30 years are 70%. This shows
that more investors are young.
 82 % investors are male and only 18% are female that shows that it is
man dominant profession.
 The investors are highly qualified and mostly have education of master
level and they are 58%.
 The ranking of three variables of investment decision according to the

investors importance as:
Ranking according to importance
Returns 1
Company’s Performance 2
Risk 3
 To see company performance investors see earning per share and

return on equity.
 Investors give more importance to investment period to see their

returns.
 The approach, an investor may follow plays very important role in

investment decision.
CONCLUSION
Our research finds that the main reason of loss in investment in stocks is the
aggressive policy of the investors. As the ranking of the variables of
investment decision shows that investors first see return on that stock then
44
company’s performance of that stock and at the end risk on that stock. So,
investors see risk on that stock at the end of the three variables. Investors
invest mostly in those stocks which give high returns and It is rule of finance
that higher the returns higher the risk. So, some times when investors do not
carefully analyze before investment in stocks related to the prices of the
stocks whether the stock at that time is undervalue or overvalue, stocks
performance, wrong expectation about the dividend paid by that company and
do not see the management of that company and just focus on returns on that
stocks that leads to loss in investment.
RECOMMENDATIONS
 Whatever approach is used by the investors whether aggressive or

conservative, they should diversify the risk by making portfolio, means
invest in more than one stock so that if they face loss in one stock then
it is overcome from other stocks.
 Do careful analysis about the prices of the stock. Must see whether it is
undervalue or overvalue.
 It is good to take advice from your broker in which company’s stock you
should invest and when invest.
 Must careful analyze the political and economic conditions of the

country before investing in stocks.
 Before investing in any company’s stock, investors should see the

company profile, companies going on projects, stock performance and
products or business type.
 Investors should also see foreign stock exchanges for investment in

stocks. For example New York stock exchange, London Stock
exchange, Delhi Stock Exchange to diversify country risk.
45
REFERENCES
 Belsky, G. (1995).” These plump stocks can cushion you in market

drop”. Money, v24, n10, p66 (1).
 Gerlach, D. (1998).” The Complete Guide to Investing With Your PC”.

PC World, v16, n5, p149 (8).
 Goldberg, S.T. (1996).” Investing for a lifetime”. Kiplinger’s Personal

Finance Magazine, v50, n11, p44 (7).
 Goldberg, S.T. (1997).” Which flavor for your fund: regular or
concentrated?” Kiplinger’s Personal Finance Magazine, v51,
n11, p38 (4).
 Mitchall, D.W., & Leander, E. (1995).” Charting the Chief Executive 100
index”. Chief Executive (U.S.), n103, p34 (6).
 National Education Association of the United States. (1997).” The
feeling is mutual (funds)”.NEA Today, v16, n3, p39(1).
 Schiffres ,M. (1994).” Utilities: these are for windows and orphans”.
Kiplinger’s Personal Finance Magazine, v48, n5, p28 (3).
 Schonfeld, E., & Atanasov, M.(1997, Nov 10).”Drugs of choice: as
biotech heats up again , its tempting to experiment with the
sector. But more than ever, picking these stocks is a
science” .Fortune, v136, n9, p293(5).
46
 Wang, P.,& Fried,C.(1997).” Smart ways to fix your mix”. Money, v26,
n8, p72 (9).
 Wang, P., Stark, E. and Tritch, T. (1994).” How to retire with twice as
much money”. Money, v23, n10, p76(10)
GLOSSARY
AGGRESSIVE APPROACH
Investors are risk lover and they invest in that stocks on which
returns are high
CONSERVATIVE APPROACH
Investors are risk lower and they invest in that stocks on which
risk is low
OVER VALUE STOCK

Those stocks who sell in stock market more than their actual value
PORTFOLIO
Investing in more than one stock
RETURN
Dividend received on an investment plus capital gain
RISK
The variation between actual and expected returns
UNDER VALUE STOCK

Those stocks who sell in stock market less than their actual value
47
APPENDIX
RESEARCH QUESTIONAIRE
Note
The respondent’s data is confidential and used only for research purpose.
Instructions
In serial no. 1, 2 and 3 circling the appropriate option , in serial no. 4 rank the
variables according to your importance and from serial no. 5 to 20, indicate
the extent to which you agree with the statements as they relate to your
investment decision, by circling the appropriate number against each, using
the scale below.
SD: Strongly Disagree: 1 D: Disagree: 2 N: Neutral: 3

Agree: 4 SA: Strongly Agree: 5
1- Age
a- Below 20 years
b- Between 20 – 30 years
c- Between 30- 40 years
d- Above 40 years
2- Gender
a- Male
b- Female
3- Education
a- Under matric
b- Inter level
c- Bachelor level
d- Master level
e- Above master level
f- Other
4- Rank the following 3 variables in terms of how important they are

for you when you purchase a new share of any company.
Ranking of Importance
a. Return on that share ---------
48
b. Risk on that share ---------
c. Company’ s Performance of that share ---------
STATEMENTS SD D N A SA
I will see the earning per share of the company in
5 which I invest. 1 2 3 4 5
I will invest in that company whose return on
6 equity is higher than others. 1 2 3 4 5
I will purchase the shares of that company which
7 capture greater market share in that industry. 1 2 3 4 5
I will prefer to invest in that company whose sales
8 growth rate is higher than others. 1 2 3 4 5
9 Government condition affects the returns. 1 2 3 4 5
10 Economic condition affects the returns. 1 2 3 4 5

A stock price may fall because overall stock
11 market has dropped. 1 2 3 4 5
When demand of a particular company stock
increases due to any reason the prices of that
12 stocks rises. 1 2 3 4 5
Returns of those stocks are higher than other
13 stocks on which transaction cost is low. 1 2 3 4 5
14 Brokerage fee reduces the returns. 1 2 3 4 5

I must consider the time period of the investment
15 on which I received the returns. 1 2 3 4 5
16 I purchase the stocks which are undervalued. 1 2 3 4 5

My approach of investment (for example low risk
or high return) plays a vital role in investment
17 decision. 1 2 3 4 5
I must see that at what level of risk and return I
18 satisfied. 1 2 3 4 5
The stock prices of all stocks must known to
19 make a good investment decision. 1 2 3 4 5
I should know the dividend paid by other
20 companies for good investment decision. 1 2 3 4 5
49

Options and Risk Involved in Different Companies Stocks

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PROJECT

TO DEVELOP AN ACCEPTABLE RESEARCH PAPER

OPTIONS AND RISK INVOLVED IN

DATED December 17, 2009

DIFFERENT COMPANIES STOCKS

We are thankful to:

• Dr. Waheed Akhter

Without him we cannot develop our Research Paper

We are also thankful to:

• Mr. ILyas Broker

For their help and cooperation

SR. NO. DESCRIPTION PAGE NO.

FOCUS OF THE STUDY

LIMITATION OF THE STUDY

A BRIEF LITERATURE SURVEY

” CEOs delegate the management of investor-relations

by CFOs from their CEOs were that it is necessary to

Goldberg (1996) has identified that:

“A sound long-term investment strategy is to buy shares of

“Investment in stocks generally has a higher rate of

Gerlach (1998) has identified that much information is available on the

The dependent variable Investment decision is influenced by the three

A return has direct impact on Investment decision. There are so many

Company performance also affects returns. If company performance is good

In sum Returns, Risk and Company performance significantly influence

Risk Investment Decision

Independent Variables Dependent Variables

 What is the reason of loss in investment in stocks?

EXTENT OF RESEARCHER INTERFERENCE

Company performance means that the overall performance of the

1- Financial performance 2- Competitiveness

The elements of the financial performance are:

b- Other is Return on investment which tells if a investor will invest in

The elements of the competitiveness are:

a- Relative market share means share of the products a company

Financial Performance Competitiveness

Check earning per share Check relative market share

Check return on equity Check sales growth

1- Country situation 2- Market situation

The elements of the Country Situation are Political Condition and

Country situation Market situation

Political Condition Overall Market Condition

Economic Condition Demand & supply of stocks

OPERATIONALIZING THE CONCEPT OF RETURN

Returns mean anything extra or additional on the amount of

Transaction cost Investing period

Brokerage fee Know when to buy

OPERATIONALIZING THE CONCEPT OF INVESTMENT

1- Objective 2- Complete information

Objective Complete information

Which approach follows Know stock prices

Risk & Return level Know dividend paid

Population size (N)

Sample size (n)

DATA COLLECTION PROCEDURE

First we conduct pilot testing. In pilot testing we go in Lahore stock

We fill questionnaire by different companies such as

 M/S. KHALID JAVED SECURITIES (PVT.) LTD. Room No.620

Valid Between 20 to 30 years 35 70.0 70.0 70.0

Between 30 to 40 years 13 26.0 26.0 96.0

above 40 years 2 4.0 4.0 100.0

Total 50 100.0 100.0

Pies show counts