Positive news can create economic value: Investigative study of the good and the bad of the KSE-100 Index

Abstract

This study is conducted to see the events impact on the developing economy. Event of dissimilar nature have been studied in this research. This research is conducted in two ways first the overall volatility tested on KSE-100 index and then the sector returns are studied through selected sectors approach. KSE-100 index data of 12 years (2003 to 2014) was collected from yahoo finance. Besides this 21 companies data of three different sectors both financial and non-financial sectors was collected from business recorder. GARCH analysis is used to test the volatility while t-test is used to check the stock returns fluctuations. The analysis clearly showed that KSE-100 index is very volatile market and highly responsive to the news. It was also observed that impact of bad event is more as compared to the impact of the good event due to the nature of the Pakistan developing market. The financial sector response is different than the non-financial sector. The returns negatively effect in financial sectors as compared to the non-financial sector. The instability of politics is a big factor for the volatile market of the country.