Abstract
The study examines the relationship between stock price and earnings-per-share for firms listed on the Karachi Stock Market (KSE) of Pakistan. The paper explores the phenomena of mean reversion which refers that the stock prices tend to move towards their average price over time. The stimulus for studying the phenomenon is the fact that less work has been conducted in emerging markets such as Pakistan. The data has been extracted from Karachi stock exchange and method used to find out relationship is random effect regression while using panel data. The results indicate that there is positive and significant relationship between the stock prices and earnings-per-share (EPS) which refers to the existence of mean reversion process. In addition, stock prices look to change with firm fundamentals, in the long-run and on average, but not essentially at the similar proportion and this relationship can help an investor to predict the stock prices with the help of earning per share.

Muhammad Abdul Basit Khan, Naimat U. Khan. (2016) Mean Reverting Phenomenon on Karachi Stock Market, Putaj Humanities And Social Science, Volume-23, Issue-1.
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