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Industry Premiums and Systematic Risk under Terror: Empirical Evidence from Pakistan

Author

Listed:
  • Ahmad, Tanveer
  • Shahzad, Syed Jawad Hussain
  • Rehman, Mobeen ur

Abstract

This study aims to investigate the impact of terrorism on Pakistani industry excess returns and systematic risk. Value weighted monthly returns for non-financial firms listed at Karachi Stock Exchange, from January 2001 to December 2010, are used for this study. A multiplicative term to study the change in systematic risk and a dummy variable to examine the industry wise impact on excess returns was introduced in the standard CAPM framework. Terrorism as a phenomenon, not an event in Pakistan, has a significant negative impact on the excess returns of twelve out of twenty seven industries. The evidence suggests a mixed effect of terrorism on the systematic risk of some industries. Transportation, Tobacco and Automobiles industries appear to be most affected sectors of the economy.

Suggested Citation

  • Ahmad, Tanveer & Shahzad, Syed Jawad Hussain & Rehman, Mobeen ur, 2014. "Industry Premiums and Systematic Risk under Terror: Empirical Evidence from Pakistan," MPRA Paper 60082, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60082
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    References listed on IDEAS

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    More about this item

    Keywords

    Terrorism; Equity market; Systematic risk; Pakistan.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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