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Abstract: This study explains the relationship and significance of terrorism attacks and Pakistan Stock Exchange behavior. This study uses standard event study methodology and total of 277 terrorist events have been selected for this purpose. The first-day abnormal return, five-day cumulative abnormal return, and ten-day cumulative return were calculated for all of the events. This study finds evidence that terrorist events affect the stock market in Pakistan. But their impact is different considering the economic and political implications of these events. Terrorist events yield mixed results where the significance of the events differed considerably in their impact on the stock market. Moreover, the abundance of terrorist events also hindered the estimation as rare events bring the element of surprise and the market adjusts to more frequent events inappropriate manner. Overall, this study lays the foundation to make further explorations into the phenomenon of uncertainty caused by terrorist events in relevance to the stock market in Pakistan. Keywords:Terrorism Events, Stock Market, Abnormal Returns JEL Classification Number: H54, P16
Audi et al. (Thu,) studied this question.