How Non-Economic Events Affect the Financial Markets: An Evidence from Sports, Terrorism and Natural Disasters

Abstract

Mob Psychology Implied in Pakistan Stock Market via Sporting Events

Faheem Aslam Dept. of Business Administration The Graduate School Hanyang University

This study investigates the impact of international cricket matches on stock market via sudden changes in social mood associated with the sporting event. We analyze the impact of 220 one-day international cricket matches on the Karachi stock exchange from 1997 to 2013. The evidence shows that cricket matches have a short-term adverse effect on the Pakistani stock market. However, the stock market absorbs the effects quickly and recovers from such sporting events in one day. The impact of cricket matches depends on match venue, match outcome and opponent team. The significant impact of the matches played in financial cities implies that the moods of local investors are induced by sporting events that affect the stock market. While a loss by the Pakistani cricket team has a significant negative impact, a win has no significant positive impact on KSE-100 index returns. The strong negative effects of game losses than the game wins confirms the existence of asymmetrical biases. The matches against India and South Africa particularly generates a downward movement in the stock market returns.|Natural Disasters and Their Effects on Stock Market

Faheem Aslam Dept. of Business Administration The Graduate School Hanyang University

Catastrophic shocks can have a multitude of economic consequences that may adversely affect the financial markets. This study estimates the impacts of natural disasters on the stock market of Pakistan. We identify 90 severe disaster events between 1992 and 2013. The empirical findings show that the natural disasters adversely affect the stock market. The stock market is sensitive to disaster type and location, however, severity of the event is not significant. The disasters in the form of earthquake, extreme temperature and flood have an overwhelming impact on Karachi stock market. More interestingly, natural disaster events in the form of flood have significant negative impact on the event day and one day before the event day Likewise, disaster events in the province of Punjab and Sindh are particularly destructive for the stock market. The results suggest that investor do not have to panic, because the stock market is efficient to absorb the impacts of such shocks in one day. The negative effects on the stock market return confirms that beyond the loss of infrastructure and precious human lives, these natural disaster events have had real financial cost to Pakistan. |Geopolitical Risk and Capital Markets: The Response of Pakistan’s Stock Market to Terrorism

Faheem Aslam Dept. of Business Administration The Graduate School Hanyang University

For the last one decade, terrorism has become the biggest global security threat. The objective of this study is to investigate the effects of terrorist attacks on the stock market of Pakistan. We identify 300 relatively major terrorist events from January 2000 to December 2011. Our empirical findings show that terrorist events adversely affect the Karachi stock market. However, such effect is short-lived and the market recovers from such terrorist shocks in one day. The significance of the location, target type, surprise factor and severity of the terrorist attacks seem to be the main determinants of the response magnitude. The results indicate that the terrorist attack in Karachi or stock market cities are particularly destructive to the stock market. Likewise, terrorist events that target the security forces and business sector have a significant negative effect on the market returns. More severe attacks (i.e. more people killed) have a larger negative impact on the KSE-100 index return. Furthermore, the more surprise factor between the terrorist events, the larger is the negative effect on the stock market.; Geopolitical Risk and Capital Markets: The Response of Pakistan’s Stock Market to Terrorism

Faheem Aslam Dept. of Business Administration The Graduate School Hanyang University

For the last one decade, terrorism has become the biggest global security threat. The objective of this study is to investigate the effects of terrorist attacks on the stock market of Pakistan. We identify 300 relatively major terrorist events from January 2000 to December 2011. Our empirical findings show that terrorist events adversely affect the Karachi stock market. However, such effect is short-lived and the market recovers from such terrorist shocks in one day. The significance of the location, target type, surprise factor and severity of the terrorist attacks seem to be the main determinants of the response magnitude. The results indicate that the terrorist attack in Karachi or stock market cities are particularly destructive to the stock market. Likewise, terrorist events that target the security forces and business sector have a significant negative effect on the market returns. More severe attacks (i.e. more people killed) have a larger negative impact on the KSE-100 index return. Furthermore, the more surprise factor between the terrorist events, the larger is the negative effect on the stock market.