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The role of terrorist events in determining stock returns in Pakistan: covering most vibrant era 2003-2013

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  • Audi, Marc
  • Sulehri, Fiaz Ahmad
  • Ali, Amjad

Abstract

This study explains the relationship and significance of terrorism attacks and Pakistan Stock Exchange behavior. This study uses standard event study methodology and data relating to the stock market index was collected from the website of the Pakistan Stock Exchange and data relating to terrorist events was collected from the newspapers of Business Recorder and DAWN. A total of 277 terrorist events have been considered in this study. The first-day abnormal return, five-day cumulative abnormal return, and ten-day cumulative return were calculated for all of the events. Terrorist events have been analyzed year-wise and also on the bases of their category like events related to foreigners, military, politics, and general terrorist events. This study finds evidence that terrorist events affect the stock market in Pakistan. But their impact is different considering the economic and political implications of these events. Terrorist events yield mixed results where the significance of the events differed considerably in their impact on the stock market. Moreover, the abundance of terrorist events also hindered the estimation as rare events bring the element of surprise and the market adjusts to more frequent events inappropriate manner. However, terrorist events relating to politics and foreigners yield more consistent results as these events were distributed across time with longer intervals. Overall, this study lays the foundation to make further explorations into the phenomenon of uncertainty caused by terrorist events in relevance to the stock market in Pakistan. Implications and directions for future research are also provided at the end of the study.

Suggested Citation

  • Audi, Marc & Sulehri, Fiaz Ahmad & Ali, Amjad, 2022. "The role of terrorist events in determining stock returns in Pakistan: covering most vibrant era 2003-2013," MPRA Paper 115142, University Library of Munich, Germany, revised 24 Oct 2022.
  • Handle: RePEc:pra:mprapa:115142
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    Cited by:

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    3. Waseem Subhani & Ali Amin & Muhammad Azeem Naz & Nasir Sultan & Sumaira Aslam, 2024. "Board Gender Diversity and Firm Value: A Case of PSX," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 237-245.

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    More about this item

    Keywords

    terrorism events; stock market; abnormal returns;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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