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

Mian Sajid Nazir (COMSATS Institute of Information Technology, Lahore, Pakistan)
Hassan Younus (NUST Business School, Islamabad, Pakistan)
Ahmad Kaleem (COMSATS Institute of Informaiton Technology, Lahore, Pakistan)
Zeshan Anwar (COMSATS Institute of Information Technology, Sahiwal, Pakistan)

Journal of Economic and Administrative Sciences

ISSN: 2054-6238

Article publication date: 13 May 2014

Issue publication date: 13 May 2014

2042

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.

Keywords

Citation

Sajid Nazir, M., Younus, H., Kaleem, A. and Anwar, Z. (2014), "Impact of political events on stock market returns: empirical evidence from Pakistan", Journal of Economic and Administrative Sciences, Vol. 30 No. 1, pp. 60-78. https://doi.org/10.1108/JEAS-03-2013-0011

Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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