Impact of Terrorism on Forex Market and Karachi Stock Exchange: Evidence from Pakistan

The present study is an effort for estimation of impact of terrorism on financial markets of Pakistan over the period from 2007 to 2010. The most terrorism affected era of Pakistan history. It finds the relationship between the terrorist activities and the two kinds of financial markets which are the capital market including the variable KSE stock prices, FOREX market which includes Exchange rate variable. A result show that terrorism has an adverse effect on the Karachi stock prices (capital market) Currency has also depreciated significantly due to the increase in the terrorism during this period. Time series data on daily basis has been used in this study. Key Words: Terrorist Incidents, Forex Market, Stock Marke