Abstract:
This study tests the impact of risks on stock returns. The different risks used in this study
are systematic risk, unsystematic risk and total risk. The study was based on three
industries. Stock returns have been taken of fifteen companies from three sectors (Oil &
Gas Sector, Food Producers and Construction & Material (Cement) Sector, five
companies from each sector. Using the index figures of Karachi Stock Exchange (KSE)
and the Stock prices, stock return, systematic risk, unsystematic risk and total risk is
calculated. A combined and industry-wise relationship between the risks and stock
returns was analyzed in the research. Different statistical instruments have been used to
find out the relationship between various risks and stock returns like, mean, standard
deviation, correlation, regression and the results are interpreted by the correlation,
percentage of impact and level of significance, through SPSS Software. While, no
significant impact of systematic risk was found, there was a strong positive and
significant impact of unsystematic risk on stock return.
