The Effect of Uncertainty on Stock Returns and Risk-returns (Volatility) Relationship Across Military and Democratic Regimes in Pakistan

This research includes empirical results in making a consistent understanding of investor sagacity, investment returns, and behavioral stock market performance in the behavioral finance trend theoretical context. The data were collected using a long range of Returns data Pakistan's stock market Since June 1994 to December 2018 on the two economic segments known as the Military Period (1999-2008 and 2009-2018). Quantile Regression(QR) and Ordinary Least Square (OLS) carried out on future returns and risk-returns (volatility) where the independent variables Consumer Price Index (CPI), Gross Domestic Product(GDP), Money Market Rate(MMR), Discount Rate(DR) and Pakistan's Uncertainty Index were taken at annual data base. The findings indicated that DR and past returns significantly impact future returns. Other factors such as GDP, inflations, MMR and conditions of instability, however, had no major impact on returns. With regard to the military process, all variables such as past returns, GDP, discount and cash market levels, as well as volatility, had a major return impact. Whereas in the process of democracy, no macroeconomic factor affected those returns. With regard to volatility, CPI appeared to be the only factor that positively impacted the volatility of share prices, as well as each of the two phases while all other factors had no significant effect overall. In the event of instability, the variability and returns remained negligible for all stages except in the military process. The results suggested that macroeconomic policies tend to have a large effect on the return as contrasted with the political phase in the military period. That could be due to lower returns, which stick lowers mostly due to problems with governance. No policy stimuli may impact returns in that situation. In addition, the volatility case remained unclear given the variables discussed.