Impact of Political and Catastrophic Events on Stock Returns

Taimur, Muhammad; Khan, Shahwali

doi:10.2139/ssrn.2528116

Cited by 4 publications

(5 citation statements)

References 32 publications

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“…Since all those markets are semi-strong form efficient, it is required to have information effect on the share price, but surprisingly the organized exchange like NYSE and AMEX's response to the catastrophic disasters is not complying with the market efficiency rule. These findings are approximately similar to the findings of Taimur and Khan (2015) who exhibit catastrophe events of 1, 5, and 10 days long do not affect the mean return of Karachi stock exchange (KSE); however, 15-day long events affect the mean return of KSE which also entails the absence of semi-strong form market efficiency at KSE.…”

Section: Catastrophic Disaster and International Marketssupporting

confidence: 80%

Effect of catastrophic disaster in financial market contagion

Siddikee

Rahman

2017

Cogent Economics & Finance

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Abstract:The study examined the contagion effect of financial market volatility from Australian capital market to Indian, New Zealand, Hong Kong, Chinese, Taiwan, and Japanese capital markets due to Australian catastrophe. In the first stage, we employed two-variable vector autoregression (VAR) model for calculating the residuals of the daily index return. In the second stage, we used adjusted correlation coefficient for detecting the significant increase in correlation coefficient of the VAR residuals after the catastrophes. Finally, Fishers r to z transformation was used for identifying contagion. After Victoria bushfire, a significant increase in the adjusted correlation coefficient of Australia with India and Hong Kong and their respective z > +1.96 validates contagion. The adjusted correlation coefficient of Australia with China and Japan increased after the Victoria bushfire but the z < +1.96 with (p > 0.05) does not confirm contagion, but rather exposed the persistence of high economic linkage. Apart from this, a significant decrease in the correlation coefficients with New Zealand is evident with corresponding z < −1.96 and (p < 0.05) advocates low economic linkage among them. After New South Wales (NSW) bushfire, contagion

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Section: Catastrophic Disaster and International Marketssupporting

confidence: 80%

Effect of catastrophic disaster in financial market contagion

Siddikee

Rahman

2017

Cogent Economics & Finance

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“…Literature documents the impact of political uncertainties on stock returns (Pastor & Veronsei, 2013;Taimur& Khan, 2015;Kelly et al, 2016) and also documents evidence for investigating the role of alternative investments like Oil (Tiwari, Suleman, Ullah & Shahbaz, 2021;Tiwari Nasreen, Ullah & Shahbaz, 2020), crypto-currencies (Huynh, Shahbaz, Nasir & Ullah, 2020) and commodities (Iqbal, 2017) to mitigate the risk of such uncertainties. Among all other commodities and especially precious metals, gold and silver has gained amplified attention from investors (Batten et al, 2010) due to positive returns of portfolios by inclusion of commodity contracts to financial investments (Creti, Joets& Mignon, 2013).…”

Section: Literature Reviewmentioning

confidence: 99%

“…when it exceeds certain threshold given by lowest 1%, 5% and 10% quantile of the return distribution (Baur & McDermott, 2010;Iqbal, 2017). While political uncertainty implies the lack of assuredness (Pastor & Veronsei, 2012) and the possibility of an unanticipated political event that may cause significant influence on the benefits of investments (Osei-Assibey, 2016).Political uncertainties are mostly found to lead negative stock market reactions (Symon, 2018;Pastor &Veronsei, 2012;Kelly, Pastor & Veronsei, 2016;Luo, Chen & Wu, 2017) hence, increased number of political events across countries has illuminated the need for investigating the role of different assets during political uncertainties (Taimur & Khan, 2015). At the same time, the growing importance of commodities i.e.…”

Section: Introductionmentioning

confidence: 99%

Is Gold a Hedge and Safe Haven during Political Uncertainties?

Rasheed¹,

Ahmad²,

Javid³

2021

BER

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Technological advancements not only bolstered almost all activities, but also accelerated the spread of information in blinks. Thus, announcements about market volatilities along with subpar financial instruments’ performance have led investors to search for alternative assets to cope with amplified uncertainties. Investors in politically unstable economies, like Pakistan, are more prone to the risks of uncertainties so require some safe investments. Previously gold has been investigated as a hedge and safe haven during various economic and market conditions but literature lacks investigation of gold during political uncertainties. So by investigating the role of gold as a hedge and safe haven during political uncertainties against sectors of Pakistan Stock Exchange (PSX), the current study not only contributes to literature, but also contributes to the knowledge of Pakistani investors and asset managers that whether they should consider gold as a diversifier or not. The study incorporates daily gold prices (gold bullion Pkr. per Tola), daily stock prices of PSX sectors and political events of Pakistan for a time span of 2009 to 2019. Appling EGARCH with quantile dummies and event dummies, findings indicate that gold acts as a hedge and safe haven against the stock market and most of its sectors in normal as well as politically uncertain situations. Thus, Pakistani investors must consider gold in asset allocation strategies for having an optimal portfolio that can cope with the risk of acute market conditions and political uncertainties. Finings of current study facilitate Pakistani investors, investment advisors and asset managers to make healthy investment decisions and enjoying the benefits of diversification through inclusion of gold in their portfolios.

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“…Another study was conducted by Taimur and Khan (2015) on the effects of political events and natural disasters on Pakistan KSE 100 stock market, by conducting a research on almost 43 government specific, and four disastrous occurrences from the years 1998 to 2013. The authors classify political events into two parts: a) encouraging political events; and b) negative government occurrences.…”

Section: Literature Reviewmentioning

confidence: 99%

Quality of Corporate Governance Risk Management in Dealing with Unanticipated Events: Evidence from Pakistan

Tashfeen¹,

Hayat²,

Mallik³

2019

LJB

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This study examines the effectiveness of the corporate governance structure when coping with any potentially unexpected events. For the purpose of this research, an event study has been conducted in order to investigate the market responses of various firms through the Cumulative Average Abnormal Return (CAAR) of the stocks listed on the Pakistan Stock Exchange (PSX). The stocks data under consideration is that which was presented after the assassination of Benazir Bhutto in 2007. The overall results indicate that firms that are governed conventionally do not perform well in the markets during a crisis situation. In our comparison of conventionally, and non-conventionally governed firms, the overall pooled results show that the former record a lower CAAR. This, in short, indicates that conventional corporate governance structures may not be equipped to take timely and dynamic actions that are deemed necessary in the face of a crisis. Moreover, our results suggest that firms which have less diversified ownership, and governance mechanisms are less vulnerable to such unanticipated events. There are two reasons that support our hypotheses: first, strict governance mechanisms, and a resultant cautious/conservative approach may not allow firms to take timely and proactive decisions during these situations and second, there is a lower chance of existing agency problems, as family owners would be working for the protection of their own wealth during these events. Therefore, our findings ultimately reveal that the conventional corporate governance structures that work during normal time period, may become ineffective during a crisis. This study, aims to fill a gap in the literature in order to provide fresh insights into the stock market dynamic, and corporate governance risk management. Furthermore, it also highlights the benefits of family owned structures, and unconventional corporate governance systems, that may outperform conventional governance structure in some situations. This, however, raises the question whether one governance framework could be the correct fit in all the situations.

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Impact of Political and Catastrophic Events on Stock Returns

Cited by 4 publications

References 32 publications

Effect of catastrophic disaster in financial market contagion

Effect of catastrophic disaster in financial market contagion

Is Gold a Hedge and Safe Haven during Political Uncertainties?

Quality of Corporate Governance Risk Management in Dealing with Unanticipated Events: Evidence from Pakistan

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