Non-linear Speculative Bubbles in the Pakistani Stock Market

Ehsan Ahmed and J. Barkley Rosser
Additional contact information
Ehsan Ahmed: James Madison University, Harrisonburg, VA, USA.

The Pakistan Development Review, 1995, vol. 34, issue 1, 25-41

Abstract: Since 1987 many stock markets of the world have experienced volatility. This has been true of many emerging stock markets. Our study of daily stock market data from Pakistan between June 1987 and May 1993 finds the results to be consistent with the impression of great volatility and unpredictability thought to be common in such emerging markets. We used the VAR technique to estimate a "presumed" fundamental on stock indices using lagged first differences of natural logs of daily exchange rates and stock indices. We used the Hamilton switching model and associated Walk test to see if such speculative trends were present. We were significantly unable to rule them out. We then tested for ARCH effects, whose presence we failed to reject. We then used ARCHgenerated residuals to apply the BDS test of general non-linear structure. We failed to reject the lack of such non-linear structure quite significantly. Thus, the Pakistani stock market during the period of study seems to have exhibited quite complex dynamics, along with apparently strong trends that may indicate the presence of speculative bubbles. This has many important implications for Pakistani as well as other emerging markets.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.pide.org.pk/pdf/PDR/1995/Volume1/25-41.pdf (application/pdf)

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:pid:journl:v:34:y:1995:i:1:p:25-41

Access Statistics for this article

More articles in The Pakistan Development Review from Pakistan Institute of Development Economics Contact information at EDIRC.
Bibliographic data for series maintained by Khurram Iqbal ().