The Response of the Pakistani Stock market to a Cataclysmic Event

Javid, Attiya Yasmin (2009): The Response of the Pakistani Stock market to a Cataclysmic Event. Published in: NUST Journal of Business and Economics , Vol. 2, No. 2 (2009): pp. 19-40.

Abstract

This study has examined the reaction of Pakistani stock market to earthquake of October 8, 2005 and its impact on the price, volume and volatility behavior of sixty firms listed on Karachi Stock Exchange (KSE) The event study methodology is adopted to assess the KSE response to this unforeseen disaster and result shows that it quickly rebounded. The market displayed amazing resilience by being effected less severely than it was expected by bouncing back following its initial level because the market was already in recession after mi-March 2005 decline. As regards the firm level activities, the analysis indicates that the increase in the return and volume of cement, steel, food, chemicals and pharmaceuticals and banking stocks indicates that individual has expectation for the upcoming demand of investment in these sectors. Furthermore there is no significant increase in the volatility because the investors take lessons from the crash of March 2005 and seem certain about the future outlook. These findings support the hypothesis that Pakistani market is reactive to unanticipated shocks however, it is resilient and it recovers soon from the catastrophic shock.

• Item Type: MPRA Paper
• Language: English
• Keywords: Event study; Kashmir earthquake; risk; return; volume; GARCH-M model
• Subjects: A - General Economics and Teaching > A1 - General Economics

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