How political risks and events have influenced Pakistan's stock markets from 1947 to the present

Omar Masood and Bruno S. Sergi

International Journal of Economic Policy in Emerging Economies, 2008, vol. 1, issue 4, 427-444

Abstract: In this paper, we analyse Pakistan's political risks and events that have affected the country's stock markets since 1947. We collected data in the form of questionnaires from historians, economists, politicians, government officials, bankers and stock market analysts in Pakistan and make forecasts using Bayesian hierarchical modelling and Markov Chain Monte Carlo (MCMC) techniques. Findings show that the probability of an event in any year is relatively high with an average arrival rate of 1.5 events per year with no time trend. In addition, forecasts suggest that the level of political risk should be remaining unchanged for the foreseeable future. Finally, we find that Pakistan's political risk carries a risk premium of between 7.5% and 12%.

Keywords: political risks; rare events; hierarchical Bayesian models; MCMC sampling; Pakistan; stock markets; political events; stock market performance. (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijepee:v:1:y:2008:i:4:p:427-444

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