Pakistan Institute of Development Economics

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Stock Market Reaction to Catastrophic Shock: Evidence from Listed Pakistani Firms 
2007:37
QR Code https://file.pide.org.pk/pdfpideresearch/wp-0037-stock-market-reaction-to-catastrophic-shock-evidence-from-listed-Pakistani-firms.pdf

Stock Market Reaction to Catastrophic Shock: Evidence from Listed Pakistani Firms 

Publication Year : 2007
Explore More : Working Paper
JEL Classification : C11, C15, G12

This study examines the effect of the earthquake of October 8, 2005 on the price behaviour and activities of KSE. Sixty firms are selected from those listed on Karachi Stock Exchange, and the results are informative about the price behaviour of the stock market in response to unanticipated shock. The results reveal the fact that the earthquake had both a positive and a negative information content for KSE stocks. There is an increase in the return and volume of the cement, steel, food, and banking sectors, which indicates that investors have expectations of the upcoming demand of investment in these sectors. Furthermore, there is no significant increase in the volatility, because the investors seem certain about the future outlook and they take into account the March 2005 market crash. These findings support the fact that the stock market of Pakistan is reactive to unanticipated shocks and it takes no time to impact the market activities. The evidence also suggests that the Pakistani stock market is resilient, and that it recovered soon after the catastrophic shock.