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Directed Financial Networks using Granger Causality: A Study on StockMarkets of Pakistan and its Major Trading Partners

Author

Listed:
  • Ayesha Latif

    (Institute of Management Sciences, University of Balochistan,Pakistan.)

  • Nadir Khan

    (Institute of Management Sciences, University of Balochistan,Pakistan.)

  • Safiullah

    (Institute of Management Sciences, University of Balochistan,Pakistan.)

Abstract

This study is conducted with the aim to construct and analyze directed financial networks of Pakistan and its major trading partners. Five major export partners of Pakistan are USA, China, UK, Germany and UAE. While major import partners are USA, China, Indonesia., Saudi Arabia and UAE. Granger causality test was conducted using the stock returns from each stock exchange. The test was used to detect whether a change in the prices one stock exchange cause a change the prices of others. The results reveal that none of the exporting or importing country’s stock exchange cause any change in the Pakistan stock exchange neither does PSX cause any change in other stock exchanges. However,some countries like Shanghai and New York, Shanghai and Frankfurt show a unidirectional causality.

Suggested Citation

  • Ayesha Latif & Nadir Khan & Safiullah, 2022. "Directed Financial Networks using Granger Causality: A Study on StockMarkets of Pakistan and its Major Trading Partners," iRASD Journal of Management, International Research Alliance for Sustainable Development (iRASD), vol. 4(2), pages 274-285, june.
    • Handle: RePEc:ani:irdjom:v:4:y:2022:i:2:p:272-283
    DOI: 10.52131/jom.2022.0402.0078
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    References listed on IDEAS

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