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Impact of global financial crisis on stock markets: Evidence from Pakistan and India

  • Rafaqet Ali

    (Department of Economics, Gomal University, Dera Ismail Khan-Pakistan)

  • Muhammad Afzal

    (Department of Management Sciences, COMMSATS Institute of Information Technology, Islamabad- Pakistan)

Registered author(s):

    Recent devastating global financial crisis started from United States, spread all over the world and adversely affected real and financial sectors of developed as well as developing countries. This crisis is called the first largest crisis after the recession of 1930s. The prime aim of this study is to envisage the impact of recent global financial crisis on stock markets of Pakistan and India. For this purpose, daily data from 1st January 2003 to 31st August 2010 of KSE-100 and BSE-100 indices, representing stock markets’ indices of Pakistan and India respectively, are used. To find volatility, EGARCH model is applied. This study empirically reveals that negative shocks have more pronounced impact on the volatility than positive shocks. These stock markets also faced persistent volatility clustering. Recent global financial crisis made mild negative impact on stock returns and enhanced volatility in Pakistani and Indian stock exchanges but this impact is stronger on Indian stock market.

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    Article provided by E3 Journals in its journal E3 Journal of Business Management and Economics..

    Volume (Year): 3 (2012)
    Issue (Month): 7 ()
    Pages: 275-282

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    Handle: RePEc:etr:series:v:3:y:2012:i:7:p:275-282
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    1. 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.
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    5. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
    6. Pyun, Chong Soo & Lee, Sa Young & Nam, Kiseok, 2000. "Volatility and information flows in emerging equity market: A case of the Korean Stock Exchange," International Review of Financial Analysis, Elsevier, vol. 9(4), pages 405-420.
    7. Ghassan Omet & Mohammad Khasawneh & Jamal Khasawneh, 2002. "Efficiency tests and volatility effects: evidence from the Jordanian stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 9(12), pages 817-821.
    8. Alper, C. Emre & Yilmaz, Kamil, 2004. "Volatility and contagion: evidence from the Istanbul stock exchange," Economic Systems, Elsevier, vol. 28(4), pages 353-367, December.
    9. Enisan, Akinlo A. & Olufisayo, Akinlo O., 2009. "Stock market development and economic growth: Evidence from seven sub-Sahara African countries," Journal of Economics and Business, Elsevier, vol. 61(2), pages 162-171.
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