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The Financial Cost of Rivalry: A Tale of Two South Asia Neighbors

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  • Sheraz Ahmed
  • Syed Hussain

Abstract

We examine the effect of bilateral political and military news on the returns and volatility of the stock markets of India and Pakistan. Our results show that the volatility of both stock markets shows a significant reaction on the arrival of news related to military aggression in a reciprocal way. Moreover, while the volatility of India's stock market seems to show a subdued response to bilateral political news, Pakistan's stock market appears to be sensitive to both political and military news originating from either country. The relatively stronger effect of military events can be attributed to a higher financial cost of confrontation between the two countries.

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  • Sheraz Ahmed & Syed Hussain, 2014. "The Financial Cost of Rivalry: A Tale of Two South Asia Neighbors," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S3), pages 35-60.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:s3:p:35-60
    DOI: 10.2753/REE1540-496X5003S303
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    Cited by:

    1. Brzeszczyński, Janusz & Gajdka, Jerzy & Kutan, Ali M., 2015. "Investor response to public news, sentiment and institutional trading in emerging markets: A review," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 338-352.

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