Directed Financial Networks using Granger Causality: A Study on StockMarkets of Pakistan and its Major Trading Partners

Ayesha Latif (), Nadir Khan () and Safiullah ()
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Ayesha Latif: Institute of Management Sciences, University of Balochistan,Pakistan.
Nadir Khan: Institute of Management Sciences, University of Balochistan,Pakistan.
Safiullah: Institute of Management Sciences, University of Balochistan,Pakistan.

iRASD Journal of Management, 2022, vol. 4, issue 2, 274-285

Abstract: This study is conducted with the aim to construct and analyze directed financial networks of Pakistan and its major trading partners. Five major export partners of Pakistan are USA, China, UK, Germany and UAE. While major import partners are USA, China, Indonesia., Saudi Arabia and UAE. Granger causality test was conducted using the stock returns from each stock exchange. The test was used to detect whether a change in the prices one stock exchange cause a change the prices of others. The results reveal that none of the exporting or importing country’s stock exchange cause any change in the Pakistan stock exchange neither does PSX cause any change in other stock exchanges. However,some countries like Shanghai and New York, Shanghai and Frankfurt show a unidirectional causality.

Keywords: Directed Networks; Granger Causality; Stock Markets; Pakistan Stock Exchange(PSX). (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ani:irdjom:v:4:y:2022:i:2:p:272-283

DOI: 10.52131/jom.2022.0402.0078

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