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Impact of Terrorism on Financial Markets of Pakistan (2006-2008)

Author

Listed:
  • Gul, Tayyeba Gul
  • Hussain, Anwar Hussain
  • Bangash, Shafiqullah Bangash
  • Khattak, Sanam Waghma Khattak

Abstract

The study is an effort to estimate the impact of terrorist activities on the financial markets in Pakistan over the period of two years i.e. 2006 to 2008. It also finds out the extent and direction of relationship between the terrorist activities and three financial markets of Pakistan, which are the Karachi Stock Exchange, the FOREX market and the Interbank market. After collection of the primary data for the terrorist activities on daily basis and the secondary data on the indicators of the three markets, by using the OLS model it attempts to quantify the impacts of various types of terrorists’ activities on financial markets. We have found during our analysis that the terrorist activities adversely affect the financial markets under study but the significance varies for different markets. Along with terrorist activities many other stochastic activities are responsible for the adverse performance of financial markets which have not been taken into account. The study recommends the policy stance on institutional development regarding investment in the innovative security industry and providing rosier environment for investors by altering the money supply and interest rates.

Suggested Citation

  • Gul, Tayyeba Gul & Hussain, Anwar Hussain & Bangash, Shafiqullah Bangash & Khattak, Sanam Waghma Khattak, 2010. "Impact of Terrorism on Financial Markets of Pakistan (2006-2008)," MPRA Paper 41990, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41990
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    References listed on IDEAS

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    Cited by:

    1. Assad Ullah & Yang Qingxiang & Zahid Ali & Nadia Hidayat, 2016. "Exploring the Relationship between Country Risk and Foreign Private Investment Inflows in Pakistan," Review of Market Integration, India Development Foundation, vol. 8(3), pages 113-134, December.
    2. Firat Bilgel & Burhan Can Karahasan, 2019. "Thirty Years of Conflict and Economic Growth in Turkey: A Synthetic Control Approach," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(5), pages 609-631, July.
    3. Apergis, Emmanuel & Apergis, Nicholas, 2016. "The 11/13 Paris terrorist attacks and stock prices: The case of the international defense industry," Finance Research Letters, Elsevier, vol. 17(C), pages 186-192.
    4. Aslam Faheem & Awan Tahir Mumtaz & Mohmand Yasir Tariq & Kang Hyoung-Goo & Mughal Khurrum Shahzad, 2021. "Stock Market Volatility and Terrorism: New Evidence from the Markov Switching Model," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 27(2), pages 263-284, May.
    5. Bouoiyour, Jamal & Selmi, Refk & Hammoudeh, Shawkat & Wohar, Mark E., 2019. "What are the categories of geopolitical risks that could drive oil prices higher? Acts or threats?," Energy Economics, Elsevier, vol. 84(C).
    6. Hashmat Ali & Zulfiqar Ali Menon & Ajab Khan & Muhammad Muddassar Khan & Imad Ali & Khan Baz & Muhammad Arif & Manzoor Hussain & Waqar Jalal, 2020. "Terrorist Activities, Investor Sentiment, and Stock Returns: Evidence from Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 139-148.
    7. Haider, Murtaza & Anwar, Amar, 2014. "Impact of terrorism on FDI flows to Pakistan," MPRA Paper 57165, University Library of Munich, Germany.
    8. Malik, Zahra & Zaman, Khalid, 2013. "Macroeconomic consequences of terrorism in Pakistan," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 1103-1123.
    9. Paul Aondona Angahar & Luper Iorpev, 2012. "An Analysis of the Effects of Insecurity on Capital Market and Economic Growth of Nigeria," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2(3), pages 207-216, July.
    10. Yaya, OlaOluwa S. & Gil-Alana, Luis A. & Adekoya, Oluwasegun B. & Vo, Xuan Vinh, 2021. "How fearful are commodities and US stocks in response to global fear? Persistence and cointegration analyses," Resources Policy, Elsevier, vol. 74(C).
    11. Yingchun Ge & Xin Li & Ximing Cai & Xiangzheng Deng & Feng Wu & Zhongyuan Li & Wenfei Luan, 2018. "Converting UN Sustainable Development Goals (SDGs) to Decision-Making Objectives and Implementation Options at the River Basin Scale," Sustainability, MDPI, vol. 10(4), pages 1-17, April.
    12. Nicholas Apergis & Matteo Bonato & Rangan Gupta & Clement Kyei, 2016. "Does Geopolitical Risks Predict Stock Returns and Volatility of Leading Defense Companies? Evidence from a Nonparametric Approach," Working Papers 201671, University of Pretoria, Department of Economics.
    13. Hira Irshad & Hasniza Mohd Taib, 2017. "A Comparative Analysis of Effects of Terrorism on World Equity Markets," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 3(6), pages 202-208.
    14. Najam, Najam Ul Sabeeh & Mehmood, Arshad Mehmood, 2019. "The economic cost of terrorism and natural disasters: A deeper analysis of the financial market markets of Pakistan," MPRA Paper 92278, University Library of Munich, Germany.

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    More about this item

    Keywords

    Terrorism; Financial Markets; KSE; KIBOR; FOREX;
    All these keywords.

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

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