Abstract
The purpose of the study is to investigate the reaction of Karachi stock
exchange (KSE) 100 Index during political event (Sit-in) using event
study methodology. All the listed firms in Karachi Stock Exchange both
under the head of financial and non-financial sectors are the
population for this study. A sample of KSE 100 index companies from
both financial and non-financial sector is selected for the study. Stock
return’s data on a daily basis are used to calculate Average Abnormal
Returns (AABR) and Cumulative Average Abnormal Returns for the
time window of 41 days (CAABR) 20 days before and 20 days after the
event (Sit-in) date. The returns of 120 days before the projected time
window are taken as the benchmark. The results indicate that AABR
and CAABR for market model are statistically significant. Furthermore
these returns are negative for most of the days for both AABR and
CAABR using market model. And the market is inefficient which fails to
fully reflect public information. The results also show that the investors
who invest their money in financial sector may earn excess abnormal
returns than Non-financial sector. Results reveal that Karachi stock
exchange show inefficient behavior to political event (Sit-in).
Wisal Ahmad, Noman Khan, Abid Usman, Fawad Ahmad, Yasir Khalil. (2017) Stock Market Reaction to Political Event ‘Sit-In’ (Evidence from Pakistan) , Journal of Managerial Sciences, Volume 11, Issue 1.
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