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Impact of political events on stock market returns: empirical evidence from Pakistan

Author

Listed:
  • Mian Sajid Nazir
  • Hassan Younus
  • Ahmad Kaleem
  • Zeshan Anwar

Abstract

Purpose - – The purpose of this paper is to investigate the relationship between uncertain political events and Pakistani Stock Markets from May 1999 to December 2011. Design/methodology/approach - – Using the mean-adjusted return model and event study methodology and by comparing the market efficiency between the two government style, i.e. autocratic and democratic, the authors determined that how uncertain political events are affecting Pakistani Stock Markets. Findings - – The empirical result shows that political events have an impact on the Karachi Stock Exchange (KSE) returns. Moreover, the paper derives from the results that the KSE is inefficient for a short span of time, after 15 days KSE absorbs the noisy information. The political situation in Pakistan was more stable in autocratic government structure than in democratic structure but it is difficult to state that the stock markets are more efficient in Autocracy because only few events took place during an autocratic regime and magnitude of events was not same in the autocratic and democratic government structure. Originality/value - – This study is unique in its nature as it examines the effect of multiple political events on stock market returns in Pakistan simultaneously and is expected to contribute significantly in the capital market literature of Pakistan in particular.

Suggested Citation

  • Mian Sajid Nazir & Hassan Younus & Ahmad Kaleem & Zeshan Anwar, 2014. "Impact of political events on stock market returns: empirical evidence from Pakistan," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 30(1), pages 60-78, May.
    • Handle: RePEc:eme:jeaspp:v:30:y:2014:i:1:p:60-78
    DOI: 10.1108/JEAS-03-2013-0011
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    Citations

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    Cited by:

    1. Hon Chung Hui, 2021. "Were Foreign Exchange Markets Reacting Negatively to Political Events? The Case of Malaysia," South Asian Journal of Macroeconomics and Public Finance, , vol. 10(1), pages 105-129, June.
    2. Dwipraptono Agus Harjito & Md. Mahmudul Alam & Rani Ayu Kusuma Dewi, 2021. "Impacts of International Sports Events on the Stock Market: Evidence from the Announcement of the 18th Asian Games and 30th Southeast Asian Games," Post-Print hal-03538176, HAL.
    3. Zhang, Wenwen & Chiu, Yi-Bin & Hsiao, Cody Yu-Ling, 2022. "Effects of country risks and government subsidies on renewable energy firms’ performance: Evidence from China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).
    4. Ghulam Ghouse & Aribah Aslam & Muhammad Ishaq Bhatti, 2021. "Role of Islamic Banking during COVID-19 on Political and Financial Events: Application of Impulse Indicator Saturation," Sustainability, MDPI, vol. 13(21), pages 1-17, October.
    5. Marek Szymański & Grzegorz Wojtalik, 2022. "Wpływ wyborów politycznych na ceny akcji na Giełdzie Papierów Wartościowych w Warszawie," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 3, pages 290-306.
    6. Kwadwo Boateng Prempeh & Joseph Magnus Frimpong & Newman Amaning, 2023. "Determining the return volatility of the Ghana stock exchange before and during the COVID-19 pandemic using the exponential GARCH model," SN Business & Economics, Springer, vol. 3(1), pages 1-20, January.
    7. Ghulam Ghouse & Muhammad Ishaq Bhatti & Muhammad Hassam Shahid, 2022. "Impact of COVID-19, Political, and Financial Events on the Performance of Commercial Banking Sector," JRFM, MDPI, vol. 15(4), pages 1-18, April.
    8. Sami Ur Rahman & Ihtesham Khan & Muhammad Faizan Malik, 2018. "The Impact of Political Activities on PSX: The Evidence from Pakistan," Global Economics Review, Humanity Only, vol. 3(2), pages 55-66, December.
    9. M. Elshendy & A. Fronzetti Colladon & E. Battistoni & P. A. Gloor, 2021. "Using four different online media sources to forecast the crude oil price," Papers 2105.09154, arXiv.org.
    10. Anya Khanthavit, 2020. "An Event Study Analysis of Thailand¡¯s 2019 General Election: A Long Window of Multiple Sub-events," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 502-514, July.
    11. Shahid Raza & Sun Baiqing & Imtiaz Hussain & Pwint Kay-Khine, 2023. "Do good and bad news affect the day of the week effect? An analysis of the KSE-100 Index," SN Business & Economics, Springer, vol. 3(7), pages 1-22, July.
    12. Lucía Morales & Bernadette Andreosso-O’Callaghan, 2019. "Challenges and Opportunities Brought to the Chinese Economy by Brexit and the New US Administration," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 18(2), pages 145-171, August.
    13. Muhammad Kashif & Fatima Sultana & Muhammad Atif & Muhammad Aslam & Ammara Sarwar & Umar Farooq Awan & Muhammad Wasif Hanif, 2023. "COVID-19 Attack on Stock Markets: Event Study and Panel Data Analysis of Organization of Islamic Countries (OIC)," Journal of Economic Impact, Science Impact Publishers, vol. 5(1), pages 50-63.
    14. Deepika Upadhyay & Swetha Wenona Suvarna, 2018. "Impact of Demonetization on the Indian Stock Market," Paradigm, , vol. 22(2), pages 175-184, December.

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