Political Instability and Stock Market: An Event Study

Faiza Ahmed, Tooba Jivani and Azam Anwar Khan
Additional contact information
Faiza Ahmed: Lecturer, FMS Department , Indus University, Pakistan
Tooba Jivani: Lecturer, Indus University, Pakistan
Azam Anwar Khan: Program Manager, DHA Suffa University. Karachi, Pakistan

Journal of Policy Research (JPR), 2023, vol. 9, issue 2, 339-345

Abstract: Our study examines the response of stock returns with respect to political instability news using time series data from 1996 to 2023. To test efficiency of market or semi-strong efficiency of Pakistan stock market for political instability news, we used most important technique in economics and finance called event study methodology. We select five events on the basis of data availability, events are put into subgroups based on anticipation window, adjustment window and event date window. We performed event study on stock return of the selected political events. To test the above objectives, first we calculate returns than excess return. We used market adjusted model to calculate excess returns and then we calculate cumulative abnormal returns. The results of our empirical analysis shows that there are significantly excess returns which mean that Pakistan stock market is more sensitive to political instability announcements. Present study increase our knowledge about salient role of political risk in growth of stock market, help market regulatory bodies, firms and investors in the implication of rule and policies that mitigate the political uncertainty.

Keywords: Stock Market; Political instability; Abnormal Return; Event study (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://jprpk.com/index.php/jpr/article/view/279/498 (application/pdf)
https://jprpk.com/index.php/jpr/article/view/279 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rfh:jprjor:v:9:y:2023:i:2:p:339-345

Access Statistics for this article

Journal of Policy Research (JPR) is currently edited by Dr. Muhammad Irfan Chani

More articles in Journal of Policy Research (JPR) from Research Foundation for Humanity (RFH) Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Muhammad Irfan Chani ().