Impact of Terrorism, Political System and Exchange Rate Fluctuations on Stock Market Volatility

Document Type: Research Paper

Authors

1 Department of Business Administration, Allama Iqbal Open University Islamabad, Islamabad, Pakistan

2 Department of Management Sciences, COMSATS Institute of Information Technology, Islamabad, Pakistan

Abstract

Terrorism, political system instability and currency rate fluctuations are the three most evident issues of 21st century. In this study, comparative analysis is performed to check the impact of all these issues on PSX Volatility. EGARCH (1,1) approach is used on four different kinds of data collected from 1st January 2000 to 31st December 2015. Terrorist events, FX return fluctuations with restoration of democratic political system in Pakistan are considered in this study. Results confirm that democratic political government reduces PSX volatility while terrorism increases it. Terrorist attacks are categorized into various categories. Event day analysis confirms that Pakistan stock market (PSX) is efficient enough to absorb the effects of terrorist attack within a day. Holding portfolios and performing arbitrage activities by the investors diversify the risks due to foreign exchange (FX) fluctuations which show no significant impact on PSX volatility.

Keywords

Main Subjects


Article Title [Persian]

تاثیر تروریسم، سیستم سیاسی و نوسانات نرخ ارز در نوسانات بازار سهام

Authors [Persian]

  • محمد احسان جاوید 1
  • شهزاد کوثر 2
1 گروه مدیریت کسب و کار، دانشگاه آزاد علامه اقبال اسلام آباد، اسلام آباد، پاکستان
2 گروه علوم مدیریت، موسسه فن آوری اطلاعات کومساتس، اسلام آباد، پاکستان
Abstract [Persian]

تروریسم، بی­ثباتی سیستم سیاسی و نوسانات نرخ ارز، سه مسأله برجسته قرن بیست و یکم است. در این مطالعه، برای بررسی تأثیر تمام این مسائل بر نوساناتبازار سهام پاکستان، تجزیه و تحلیل تطبیقیانجام شده­است. روش EGARCH (1،1)در چهار نوع اطلاعات جمع­آوری شده از 1 ژانویه 2000 تا 31 دسامبر 2015 مورد­استفاده قرار­گرفته­است. رویدادهای تروریستی، نوسانات بازگشتنوسانات ارزبا بازسازی سیستم سیاسی دموکراتیک در پاکستان در این مطالعه در نظر گرفته شده­است. نتایج نشان می­دهد که دولت سیاسی دموکراتیک، نوساناتبازار سهام پاکستانرا کاهش می­دهد، در حالی­که تروریسم آن را افزایش می­دهد. حملات تروریستی به دسته­های مختلف طبقه­بندی می­شوند. تجزیه و تحلیل روز رویداد نشان می­دهد که بازار سهام پاکستانبه اندازه کافی کارآمد است تا تاثیرات حملات تروریستی را در یک روز جذب کند. نگهداری سبد سهام و انجام فعالیت­های آربیتراژی توسط سرمایه­گذاران، ریسک­های ناشی از نوسانات ارزرا متنوع­سازی می­کنند در نتیجه هیچ تاثیر قابل­توجهی بر نوساناتبازار سهام پاکستانندارند.

Keywords [Persian]

  • رویدادهای تروریستی
  • تروریسم خارجی
  • تروریسم داخلی
  • نوسانات بازار سهام
  • EGARCH
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