Terrorism and Stock Market Linkages: An Empirical Study from Pakistan

Arif, Imtiaz and Suleman, Tahir (2014): Terrorism and Stock Market Linkages: An Empirical Study from Pakistan.

Abstract

This paper investigated the impact of prolonged terrorist activities on stock prices of different sectors listed in Karachi Stock Exchange by using newly developed terrorism impact factor index with lingering effect (TIFL) and monthly time series data from 2002(Jan) to 2011(Dec). Johansen and Jeuselius cointegration revealed long run relationship between terrorism and stock price. Normalized cointegration vectors are used to test the effect of terrorism on stock price. Results demonstrated significantly mixed positive and negative impact of prolonged terrorism on stock prices of different sectors and have shown that market has not become insensitive to the prolonged terrorist attacks.

• Item Type: MPRA Paper
• Language: English
• Keywords: Prolonged Terrorist Attacks, Financial Risk, Financial Markets, Stock Price
• Subjects: G - Financial Economics > G0 - General > G01 - Financial Crises; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

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