Which Matters the Most for the Trading Index? (Law and Order or Weather Conditions)

Abstract

Stock Markets are the indicators of economic activity taking place in an economy. There are multiple factors that can affect the performance of a Stock market. Besides the economical factors, the human behavior, the mood, willingness to pay and consumption patterns of people also plays an important role and affect the performance of a stock market. It has been empirically proven that human behavior is enormously and strongly influenced by the various weather conditions and law and order situation of the territory. This study investigates the effect of various weather conditions and law and order situation of Karachi on Karachi Stock Exchange trading volume. The daily data which includes various weather conditions, law and order situations of the city and the trading volume of Karachi Stock exchange for the period from January 1995 to December 2010 has been tested. The study found that there is a significant impact of law and order situation on Karachi Stock Exchange trading volume, and likewise, weather conditions also regulate the performance of Karachi Stock Exchange most often. Temperature is a very significant driving factor in impacting the trading volume of Karachi Stock Exchange whereas, Humidity and Sea Level Pressure also has a significant impact on KSE performance