Terrorist Activities, Investor Sentiment, and Stock Returns: Evidence from Pakistan

Hashmat Ali, Zulfiqar Ali Menon, Ajab Khan, Muhammad Muddassar Khan, Imad Ali, Khan Baz, Muhammad Arif, Manzoor Hussain and Waqar Jalal
Additional contact information
Hashmat Ali: Department of Management Sciences, Abbottabad University of Science and Technology, Pakistan
Zulfiqar Ali Menon: Department of Business Administration, University of Sindh, Mirpurkhas campus Pakistan,
Ajab Khan: Department of Management Sciences, Abbottabad University of Science and Technology, Pakistan
Muhammad Muddassar Khan: Department of Management Sciences, Abbottabad University of Science and Technology, Pakistan
Imad Ali: College of Economics and Management, Northwest A&F University, China,
Khan Baz: School of Economics and Management, China University of Geosciences (Wuhan), China,
Muhammad Arif: Department of Management Sciences, University of Swabi, Khyber Pakhtunkhwa, Pakistan,
Manzoor Hussain: Department of Management Sciences, Balochistan University of Information Technology, Pakistan,
Waqar Jalal: Department of Management Sciences, Abdul Wali Khan University Mardan, Pakistan

International Journal of Economics and Financial Issues, 2020, vol. 10, issue 3, 139-148

Abstract: Motivated by the previous literature on investor sentiment and assuming that terrorist activities affect investor mood, this study attempts to address the psychological impact of terrorism for investors in Pakistan stock market. Apart from a direct economic loss, major terrorist incidents create/exacerbate uncertainty and fear in the market. The investors are likely to over-respond to such incidents and once the dust settles the market tend to recover. The analysis of cumulative abnormal returns in the aftermaths of terrorist incidents and the volume analysis provide strong evidence that the terrorist incidents adversely affect investors' sentiments and confidence in the market as manifested through relatively feeble trading volumes.

Keywords: Sentiment; Terrorism; Stock Market; Pakistan (search for similar items in EconPapers)
JEL-codes: C33 E44 G15 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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