Article thumbnail

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

By Attiya Y. Javid


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.Catastrophic Shock, Market Model, GARCH Specification, Average Return, Market Volume, Market Volatility

OAI identifier:

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.

Suggested articles


  1. (1998). A Seasonality in the Pakistan Equity Market: The Ramadan Effect. The Pakistan Development Review 37:1,
  2. (1969). Adjustment of Stock Price to New Information.
  3. (2002). An Empirical Analysis of Capital Markets’ Response to Cataclysmic Events.
  4. (1988). Announcement Effect of New Equity issues and Use of Intraday Price Data.
  5. (1995). Applied Econometric Time Series.
  6. (1982). Autoregressive Conditional Heteroscedasticity with the Estimates of United Kingdom Inflation.
  7. (1996). Catastrophic Shocks in the PropertyLiability Insurance Industry: Evidence on Regularity and Contagion Effects.
  8. (1933). Characteristics and Procedure of Common Stock Split-Ups.
  9. (1988). Comment on the Market Crash: Six Months After.
  10. (1984). Corporate Financing and Investment Decisions When Firms have Information That Investor Do Not Have.
  11. (1985). Economic Event , Information Structure and the Return Generating Process.
  12. (1986). Equity Issues and Offering Decisions.
  13. (1997). Event Studies in Management Research: Theoretical and Empirical Issues.
  14. (1997). Event Study in Economics and Finance.
  15. (1992). Gaining from Loss:
  16. (1986). Generalised Autoregressive Conditional Hetroscedasticity.
  17. (1980). Measuring Security Price Performance.
  18. (1990). Problems and Solution in Conducting Event Studies.
  19. (1999). Stock Market Reaction to Strategic Investment Decisions.
  20. (1993). Stock Prices, News and Business Conditions.
  21. (1965). The Behaviour of Stock Market Prices.
  22. (1996). The Benefits and Costs of Internal Markets, Evidence from Asian Financial Crisis. Unpublished Working Paper, World Bank.
  23. (1992). The Contribution to Event Study Methodology with An Application to the Dutch Market.
  24. (1983). The Impact of Merger Related Regulations on the Shareholders of Acquiring Firms.
  25. (1983). The Market for Comparative Control: The Scientific Evidence.
  26. (1980). The Market for Corporate Control: The Empirical Evidence since
  27. (1999). The Response of Karachi Stock Exchange to Nuclear Detonations. The Pakistan Development Review 38:4,
  28. (1989). The Return of Acquiring Firms in Tender Offers: Evidence from Three Decades.
  29. (1994). The Role of Financial Economics in Securities Fraud Cases: Application at the Security and Exchange Commission.
  30. (2000). The Stock Market Reaction to German and American Companies to Potential German Unification.
  31. (1976). Time Series Analysis, Forecasting and Control (rev, ed). San Francisco Holden-Day.
  32. (1989). Trigering the 1987 Stock Market Crash.
  33. (1985). Using Daily Stock Returns: The Case of Event Study.
  34. (1981). Using Financial Data to Measure Effect of Regulations.
  35. (1992). Value Event Study.
  36. (2001). Voluntary Abatement and Market Value: An Event Study Approach. Stanford Institute for Economic Policy Research. (Discussion Paper No.