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General election effect on the network topology of Pakistan’s stock market: network-based study of a political event

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  • Bilal Ahmed Memon

    (Jiangsu University)

  • Hongxing Yao

    (Jiangsu University)

  • Rabia Tahir

    (Jiangsu university)

Abstract

To examine the interdependency and evolution of Pakistan’s stock market, we consider the cross-correlation coefficients of daily stock returns belonging to the blue chip Karachi stock exchange (KSE-100) index. Using the minimum spanning tree network-based method, we extend the financial network literature by examining the topological properties of the network and generating six minimum spanning tree networks around three general elections in Pakistan. Our results reveal a star-like structure after the general elections of 2018 and before those in 2008, and a tree-like structure otherwise. We also highlight key nodes, the presence of different clusters, and compare the differences between the three elections. Additionally, the sectorial centrality measures reveal economic expansion in three industrial sectors—cement, oil and gas, and fertilizers. Moreover, a strong overall intermediary role of the fertilizer sector is observed. The results indicate a structural change in the stock market network due to general elections. Consequently, through this analysis, policy makers can focus on monitoring key nodes around general elections to estimate stock market stability, while local and international investors can form optimal diversification strategies.

Suggested Citation

  • Bilal Ahmed Memon & Hongxing Yao & Rabia Tahir, 2020. "General election effect on the network topology of Pakistan’s stock market: network-based study of a political event," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-14, December.
    • Handle: RePEc:spr:fininn:v:6:y:2020:i:1:d:10.1186_s40854-019-0165-x
    DOI: 10.1186/s40854-019-0165-x
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    References listed on IDEAS

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    Cited by:

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    2. Dariusz Siudak, 2021. "Sectoral Analysis of the US Stock Market through Complex Networks," European Research Studies Journal, European Research Studies Journal, vol. 0(3B), pages 951-966.
    3. Lihuan Guo & Wei Wang & Yenchun Jim Wu & Mark Goh, 2021. "How much do social connections matter in fundraising outcomes?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-23, December.
    4. Bilal Ahmed Memon & Rabia Tahir, 2021. "Examining Network Structures and Dynamics of World Energy Companies in Stock Markets: A Complex Network Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 329-344.
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    6. Mosab I. Tabash & Musla Valappil & Uzma Iqbal & Umar Farooq, 2023. "The Impact of General Election 2018 on Stock Prices: Evidence from Emerging Economy," Advances in Decision Sciences, Asia University, Taiwan, vol. 27(4), pages 90-113, December.

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