Abstract:
This research aims to identify the explanatory variables that influence the individuals' tendency to rearrange their financial portfolios. In addition to, Find out some alternative policies and recognize the optimum transmition mechanism of monetary effect. Besides, it pursues the management power to control the market prices of equities. Certainly, the securities circulation movement indicates to the financial investment success in achieving the goals of return generation and preserving a balanced level of liquidity. Because, the circulation is determined by the risks that spring form some sources (variables); this research attempts to determine these sources.
Hence, this research claims that, the equities' circulation reflects the market price of equities, the liquidity of security and the net profit of the company. Whereas the liquidity of security and the net profit of the company influence the circulation through the market price of equity. And the market prices of equities themselves are connected with each other.
To test this hypothesis the Research follows descriptive and statistical analysis methodology to examine a secondary data which are compiled from (KSE) reports through the period (January 2008 October 2008).And the study includes all listed companies of (KSE) so as to estimate exactly the interactive relationships. And avoid falling on biasness. Besides, the research follows comparative methodology in the stage of examining the internal factors of the risks where two cases are compared in this stage the research uses annual data through the period (2000 - 2006).The research concludes that the circulation in (KSE) doesn’t reflect truly to the market price change. Furthermore, the research finds disconnection among the prices of equities .and the research proves that both net profit and liquidity degree control the market price but the explanatory power of each variable depends on internal conditions of the company. Moreover, the research illustrates that the net profit effects positively on the market price whereas the impact of the liquidity degree depends on the liquidity ratio that is defined by the managers. If that proportion is less than the unitary, the liquidity degree will give positive effect on the market price and vise versa.
According to the findings the research recommends that the authorities should design some policies in order to create a sort of competition for example using the taxes to encourage joining the market. Also, the managers should attract more investors by realizing more profits.
