How political risks and events have influenced Pakistan’s stock markets from 1947 to the present

Article


Masood, Omar and Sergi, Bruno 2008. How political risks and events have influenced Pakistan’s stock markets from 1947 to the present. International Journal of Economic Policy in Emerging Economies. 1 (4), pp. 427-444.
AuthorsMasood, Omar and Sergi, Bruno
Abstract

In this paper, we analyse Pakistan’s political risks and events that have affected the country’s stock markets since 1947. We collected data in the form of questionnaires from historians, economists, politicians, government officials, bankers and stock market analysts in Pakistan and make forecasts using Bayesian hierarchical modelling and Markov Chain Monte Carlo (MCMC) techniques. Findings show that the probability of an event in any year is relatively high with an average arrival rate of 1.5 events per year with no time trend. In addition, forecasts suggest that the level of political risk should be remaining unchanged for the foreseeable future. Finally, we find that Pakistan’s political risk carries a risk premium of between 7.5% and 12%.

Keywordspolitical risk; rare events; hierarchical Bayesian models; MCMC sampling; Pakistan; stock markets; stock market analysts; market forecasts
JournalInternational Journal of Economic Policy in Emerging Economies
Journal citation1 (4), pp. 427-444
ISSN1752-0452
Year2008
Accepted author manuscript
License
CC BY-ND
Web address (URL)http://dx.doi.org/10.1504/IJEPEE.2008.021285
http://hdl.handle.net/10552/205
Publication dates
Print2008
Publication process dates
Deposited26 Jun 2009
Additional information

Citation:
Masood, O. Sergi, B. S. (2008) 'How political risks and events have influenced Pakistan’s stock markets from 1947 to the present' International Journal of Economic Policy in Emerging Economies 1 (4) 427-444.

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