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The Response of Karachi Stock Exchange to Nuclear Detonation


  • Attiya Y. Javed

    (Pakistan Institute of Development Economics, Islamabad.)

  • Ayaz Ahmed

    (Pakistan Institute of Development Economics, Islamabad.)


Stock markets are highly reactive to internal and external developments. News of major events take no time to impact, the Stock Exchange that quite often serves as a barometer of the good and bad for the market. The importance of particular events and their effect on the stock market has been a subject of study in financial literature. Such studies attempt to assess the extent to which stock markets’ performance stray’s from the normal around the time of the occurrence of subject events. The stock market crash in the USA of October 1987 and related crash in the Far East later in January 1998 led to several studies of the event. On October 14, 1987, the US stock market began the steepest decline of its history, culminating in the crash of October 19, when the Dow Jones Industrial Average fell 508 points (22.6 percent). Certain aspects of the event of Black Monday as it is called emphasised the need for research to explore what fundamental economic factors triggered the large decline and the institutional and structural factors that were inherent in the trading strategies of investors. Michell and Netter (1989) have presented evidence that a tax bill containing anti takeover provision proposed by the U.S. House Ways and Means Committee of Oct. 13, 1987 was the economic event that triggered the October 19 crash. Other events and economic conditions during October 14–16 have been cited in the literature including higher than expected trade deficits, rising interest rate and increased worries about the government deficit and fear of inflation by many studies. Certain trading strategies such as index arbitrage and portfolio insurance has been cited by the Report of Presidential Task Force (1988). Roll (1988) has argued the crash did not begin in US since many other world markets experienced a severe decline on October 19 before US markets opened.

Suggested Citation

  • 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.
  • Handle: RePEc:pid:journl:v:38:y:1999:i:4:p:777-786

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    References listed on IDEAS

    1. Chou, Ray Yeutien, 1988. "Volatility Persistence and Stock Valuations: Some Empirical Evidence Using Garch," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(4), pages 279-294, October-D.
    2. Jamshed Y. Uppal, 1993. "The Internationalisation of the Pakistani Stock Market: An Empirical Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 32(4), pages 605-618.
    3. Ehsan Ahmed & J. Barkley Rosser, Jr., 1995. "Non-linear Speculative Bubbles in the Pakistani Stock Market," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(1), pages 25-41.
    4. Leland, Hayne & Rubinstein, Mark, 1988. "Comments on the Market Crash: Six Months After," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 45-50, Summer.
    5. Akgiray, Vedat, 1989. "Conditional Heteroscedasticity in Time Series of Stock Returns: Evidence and Forecasts," The Journal of Business, University of Chicago Press, vol. 62(1), pages 55-80, January.
    6. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    Cited by:

    1. Rafaqet Ali & Muhammad Afzal, 2012. "Impact of global financial crisis on stock markets: Evidence from Pakistan and India," E3 Journal of Business Management and Economics., E3 Journals, vol. 3(7), pages 275-282.
    2. Javid, Attiya Yasmin, 2009. "The Response of the Pakistani Stock market to a Cataclysmic Event," MPRA Paper 37565, University Library of Munich, Germany.
    3. Attiya Y. Javid, 2007. "Stock Market Reaction to Catastrophic Shock: Evidence from Listed Pakistani Firms," PIDE-Working Papers 2007:37, Pakistan Institute of Development Economics.
    4. Asiya Sohail & Attiya Yasmin Javid, 2014. "The Global Financial Crisis and Investors’ Behaviour; Evidence from the Karachi Stock Exchange," PIDE-Working Papers 2014:106, Pakistan Institute of Development Economics.

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