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.
Download (1MB) | Preview
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|
|Original Title:||The Response of the Pakistani Stock market to a Cataclysmic Event|
|Keywords:||Event study; Kashmir earthquake; risk; return; volume; GARCH-M model|
|Subjects:||A - General Economics and Teaching > A1 - General Economics|
|Depositing User:||Attiya Yasmin Javid|
|Date Deposited:||02. Apr 2012 13:15|
|Last Modified:||06. Apr 2015 04:42|
Angbazo, L, A. and R. Narayanan (1996) Catastrophic Shocks in the Property-Liability Insurance Industry: Evidence on Regularity and Contagion Effects. The Journal of Risk and Insurance, 63(4), 619-637.
Arora, S. (2001) Voluntary Abatement and Market Value: An Event Study Approach. Discussion Paper No. 30. Stanford Institute for Economic Policy Research.
Asquith, P. and D. Mullins (1986) Equity Issues and Offering Decisions. Journal of Financial Economics, 15(1-2). 61-89.
Barklay, M. J. and R. H. Litzenberger (1988) Announcement Effect of New Equity Issues and Use of Intraday Price Data. Journal of Financial Economics, 21(1). 71-109.
Brown, S. J. and J. B. Warner (1980) Measuring Security Price Performance. Journal of Financial Economics, 8(3). 205-58.
Brown, S. J. and Warner (1985) Using Daily Stock Returns: The Case of Event Study. Journal of Financial Economics, 14(1). 3-31.
Box, G. E. P. and G. m. Jenkins (1976) Time Series Analysis, Forecasting and Control. Rev. Ed. San Francisco: Holden-Day.
Carter, David A. and Battey J. Simkins (2004) The Market Reaction to Unanticipated Catastrophic Events: The Case of Airline Stock Returns and September 11 Attacks, The Quarterly Review of Economics and Finance, 44, 539-558.
Claessens S. S. Djankov, J. Fans and L. Lang (1996). The Benefits and Costs of Internal Markets, Evidence from Asian Financial Crisis. Unpublished working Paper, World Bank.
Chou, R. (1988) Volatility persistence and Stock Market Valuation: The empirical evidence using GARCH, Journal of Applied Econometrics, 56(3) 701-714.
Cummins, J. D. and Chistopher M. Lewis (2003) Catastrophic Event, Parameter Uncertainty and the Breakdown of Implicit Long term Contracting: A Case of Long Terrorism Insurance, The Journal of Risk and Uncertainty, 26, 2-3, 153-178.
Domodaran, A (1985) Economic Event, Information Structure and the Return Generating Process. Journal of Financial and Quantitative Analysis, 20(4). 423-466.
Enders, W. (1995). Applied Econometric Time Series. New York. John Wiley and Sons.
Engle. R. E. (1982) Autoregressive Conditional Heteroscedasticity with the Estimates of United Kingdom Inflation, Econometrica, 50, 987-1007.
Fama, E. F. (1965) The Behavior of Stock Market Prices. Journal of Business, 38, pp.34-105.
Fama, E. F., L. Fisher, M. C. Jensen and R. Roll (1969) Adjustment of Stock Price to New Information. International Economic Review, 10(1), 1-21.
Jarrell, G. A., J. A. Brickley and J. M. Netter (1980) The Market for Corporate Control: The Empirical Evidence since 1980. Journal of Economic Perspective. 2(1). 40-68.
Jarrell, G. and A. Poulsen (1989) The Return of Acquiring Firms in Tender Offers: Evidence from Three Decades. Financial Management, 18(3). 12-19.
Javid, Y. Attiya and Ayaz Ahmed (1999) The Response of Karachi Stock Exchange to Nuclear Detonations. The Pakistan Development Review, 38(4). 778-786.
Jensen, M. C. and Richard S. Ruback (1983) The Market for Comparative Control: The Scientific Evidence. Journal of Financial Economics, 11(1-4), 5-50.
Jong Frank De A. Kemmna and T. Klock (1992) The Contribution to Event Study Methodology with an Application to the Dutch Market, Journal of Banking and Finance, 16, 11-36.
Michell, M. L. and Jeffery, N. Netter (1989) Triggering the 1987 Stock Market Crash. Journal of Financial Economics, 24, 37-68.
MacKinlay, A. C (1997) Event Study in Economics and Finance. Journal of Economic Literature. 35(1). 13-39.
McQueen C. and R. Vance (1993). Stock Prices, News and Business Conditions. Review of Financial Studies. 6(3). 683-707.
McWilliams, A. and D. Siegel (1997) Event Studies in Management Research: Theoretical and Empirical Issues. Academy of Management Sciences Journal, 40(2), 626-57.
Myers, S. c. and N. S. Majluf (1984) Corporate Financing and Investment Decisions When Firms have Information That Investor do not Have. Journal of Financial Economics. 13(2). 187-221.
Schnusenberg, O (2000). The Stock Market Reaction to German and American Companies to Potential German Unification. Journal of Financial and Strategic Decisions. 30(1).
Schwert, G. W. (1981) Using Financial Data to measure Effect of Regulations. Journal of Law and Economics. 24(1). 121-58.
Schipper, K. and R. Thompson (1983) The Impact of Merger Related Regulations on the Shareholders of Acquiring Firms. Journal of Accounting Research, 21(1). 184-221.
Shelor, R. M, D. C. Anderson and M. L. Cross (1992). Gaining from Loss: Property-Liability Insurance Stock Values in the Aftermath of 1989 California Earthquake. The Journal of Risk and Insurance. 59(3), 476-488.
Wooridge, J. R. and C. C. Snow (1999). Stock Market Reaction to Strategic Investment Decisions, Strategic Management Journal, 11(5), 353-363.