Non-linear Speculative Bubbles in the Pakistani Stock Market
AbstractSince 1987 many stock markets of the world have experienced volatility. This has been true of many emerging stock markets. Our study of daily stock market data from Pakistan between June 1987 and May 1993 finds the results to be consistent with the impression of great volatility and unpredictability thought to be common in such emerging markets. We used the VAR technique to estimate a "presumed" fundamental on stock indices using lagged first differences of natural logs of daily exchange rates and stock indices. We used the Hamilton switching model and associated Walk test to see if such speculative trends were present. We were significantly unable to rule them out. We then tested for ARCH effects, whose presence we failed to reject. We then used ARCHgenerated residuals to apply the BDS test of general non-linear structure. We failed to reject the lack of such non-linear structure quite significantly. Thus, the Pakistani stock market during the period of study seems to have exhibited quite complex dynamics, along with apparently strong trends that may indicate the presence of speculative bubbles. This has many important implications for Pakistani as well as other emerging markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.
Volume (Year): 34 (1995)
Issue (Month): 1 ()
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Javed Iqbal & Aziz Haider, 2005.
"Arbitrage Pricing Theory: Evidence From An Emerging Stock Market,"
Lahore Journal of Economics,
Department of Economics, The Lahore School of Economics, vol. 10(1), pages 123-139, Jan-Jun.
- Iqbal, Javed & Haider, Aziz, 2005. "Arbitrage pricing theory: evidence from an emerging stock market," MPRA Paper 8699, University Library of Munich, Germany.
- Husain, Fazal & UPPAL, Jamshed, 1999. "Stock Returns Volatility in an Emerging Market: The Pakistani Evidence," MPRA Paper 5270, University Library of Munich, Germany.
- Husain, Fazal, 1997.
"The Random Walk Model in the Pakistani Equity market: An Examination,"
5034, University Library of Munich, Germany.
- Fazal Husain, 1997. "The Random Walk Model in the Pakistani Equity Market: An Examination," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(3), pages 221-240.
- Salman Syed Ali & Khalid Mustafa, 2001. "Testing Semi-strong Form Efficiency of Stock Market," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 651-674.
- Attiya Y. Javed & Ayaz Ahmed, 1999. "The Response of Karachi Stock Exchange to Nuclear Detonation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 38(4), pages 777-786.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Khurram Iqbal).
If references are entirely missing, you can add them using this form.