Impact of Terrorism On Stock Return

Universal Journal of Management and Social Sciences
Vol. 2, No.8; August 2012
Impact of Terrorism on Stock returns: Evidence from Pakistan

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*Dr Aurangzeb , Tasfoura Dilawer 2 HOD Business Administration, Dadabhoy Institute of Higher Education, Research Scholar *cdraurangzeb50@yahoo.com
Abstract This study examines the impact of terrorism on stock returns and to find out the combined effect of terrorist activities on stock returns. Four variables are selected, bombing, armed isolation, assassination and hostage taking. Data has been taken from KSE -30index (Karachi Stock Exchange). To make this effort successful, time series, monthly data of these 30 companies have been gathered covering period from 2004 to 2010. Regression analysis and granger causality have been applied to analyze the impact of terrorism on stock returns of listed companies with KSE-30 index. We found stock returns react negatively to terrorist activities but variation in significance do exist in literature. It is recommended that companies should hire people to closely work and analyze on federal, local and business level. Once companies are aware with their structured and unstructured situations then they can take better steps to save companies returns and can make better policies. Keywords: KSE-30 index, stock price return, terrorism, granger causality. 1. Introduction The word terrorism was initially heard during the French revolution in late 1700. It is defined as planned and 1 deliberately done murder. Many researches have been done to see the impact of terrorism on different industries and financial markets. The impact of terrorism is a terrible risk. Terrorism has great effect on every ones life either directly or in directly. Many economies are under serious constraint due to terrorism including Pakistan, Iran, Jordan, Kuwait, Yemen and US. The attack on world trade center by Al-Qaeda.can be termed as the single most important factor that changed the whole world. There are many acts of terrorism such as bombing of Indonesia and Madrid, secondly the attack that has been done on USS Cole in Yemen and an attack of world trade center in US. Due to all these activities economy of many countries got affected. As we know that the finance markets of the whole world are interrelated and any disaster activity in one country must affect another. In this research paper we tried to explore the impact of terrorist activities on specific country that is Pakistan. We can expect Pakistan will have different impact of terror on stock returns from others, because it depends on that which country is trading with whom and which nation was attacked as we take the example of US world trade center those countries who do trading with US will be more affected than others who do not. 1.1. Background 2 Terrorist activities are normally reason to generate the unfavorable short term reaction in financial markets. If we compare the impact of terrorism on long run and short run, the evidences state that impact on return is 3 not forceful in long run as compared to short term. Researchers have exposed that the terrorism has a negative impact on stock returns and it is also found that terrorism has significant negative impact on the 4 value of KSE 100 index. (Gul 2010) analyzed the impact of terrorist activities of three financial markets that are Karachi Stock Exchange, FOREX and Interbank market are examined and it is found that there is an insignificant but negative impact of terror activities on FOREX market, cause can be interbank data, and all 5 terror events have negative impact on Stock Exchange market. Chesney, M., Reshetar, G., & Karaman, M. (2010), proposed diversification strategies to reduce the impact of terrorism. Some assets should be held that can react positively against the negative reaction of stock markets and it is mentioned that the reaction of gold market is the most negative to terrorist attacks than other
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Lila Perl Chen, A. H., & Siems, T. F. (2004, March) 3 Abadie, A., & Gardeazabal, J. ( 2003, Mar) 4 Eldor, R., & Melnick, R (2004) 5 Gul, T., Hussain, A., Bangash, S., & Khattak, S. W. (2010)
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markets. Based on this, it was suggested that investment should be done in commodities rather in gold 6 market. In Pakistan, a very few researches have been conducted on this topic, and the result explored no effect of internal terror activities on stock market. The purpose of this study is to find out the combined impact of internal terrorist activities with recent data on Pakistani stock returns. 1.3. Research objective: The primary objective of this research is to see the combined impact of different recent internal terrorist activities on stock returns and to find out which companys return has suffered the most. For this purpose four activities are combined, (target killing, bombing, armed isolation and hostage taking) as one variable. 2. Literature Review 2.1 Theoretical Background The core objective of terrorism is to influence the government and its a deliberate act that creates fear, violence and anxiety among people. Terrorism has direct and indirect impact, direct impacts involve immediate and quick negative responses of economy and business such as decline in investments, growth and consumptions of different sectors and long term negative effects on firms, economy and stock markets are 7 known as indirect effects of terrorism and need government policies to over come these. Terrorist activities caused to reduce the investments of delay for long period. The US stock market got close after world trade center attack for few days, that was a shock for business and industries. It is seen that after 9/11 attacks there was a great decline in tourism, airline and insurance stocks. Due to terrorism great mergers 8 and acquisitions have been seen. Through the event study, it is realized that on the value of insurance companies there is a negative impact of World Trade Center Attack. They saw the increase in variance of stock 9 market, the increase in uncertainty and decrease in capital. The negative effects of terrorism on economies for many countries are not long term and diversified economies have an ability to be strong with terrorism and 10 terrorism is a cause of re allocation of resources and investments. The impact of 9/11 in long run is larger than short run and the stock market reaction was brief but negative to 11 world trade center attack (WTC), one more reason of the fall of US economy was the little rise in dollar. The European stock market reacted negatively to terrorist activities it is perceived that there was a decline in 12 earnings on share on response to terrorism. Many studies proved the relationship of terrorism and stock market being negative, worse reactions have been witnessed to bigger terrorism activities (see Drakos, 2009). By diversification, the negative impact of these activities can be reduced. Terrorism does not have negative impact on currency market (see Eldor & Melnick, 2004). Guidolin & Ferrara, (2005) showed that internal stock markets are more affected than international markets, with the negative effects. The impact of Terrorism is much larger on KIBOR than stock market (see Gul et el, 2010). It is found that if in any country terrorist activities play major role to disturb the financial markets then these activities will also open the door for more terror (see Nguyen & Enomoto 2009). In such conditions some financial tool like bonds that are connected with terror events, volatility options and insurance programs that are introduced to facilitate the investor after terrorism can be helpful to reduce the market crash and the cost of terrorism that is assessed in loss than the original. 2.2 Empirical Studies Ahmed et al (2011) examined the reaction of tourism industry to terrorist activities and to see the impact the data are taken from the period of 1990 to 2010. This study is a conceptual study. In this study tourism industry
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Chesney, M., Reshetar, G., & Karaman, M. (2010) Gabriele G. S. Suder, 8 Business confronts terrorism: risks and responses By Dean C. Alexander 9 W. Kip Viscusi
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Philip Keefer and Norman Loayza Harry Ward Richardson, Peter Gordon 12 William L. Megginson, Scott B. Smart
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is taken as dependent variable and terrorism as independent variable. It is analyzed that terrorism has negative impact on tourism it restricts not only tourists but also businesses to enter in Pakistan. Christofis et al (2010) examined the impact of Istanbul bombing on stock market of Istanbul and the data are taken of the year of 1997 to 2009 and included 3391 trading days. Asset pricing model, market model of McKinley 1997 and daily returns of Dow Jones index is used. To see the impact of three event national-100, bank index, industrial index, service, tourism and trade index is used. Results explored that 1999 attack had negative impact except banking, industrial and trade sector. It is explored that in the reaction of 2003 blast tourism index continuously going down and banking industry fill to 11%. Liargovas and Repousis (2010) examined the effect of three major events of terrorism (London and Madrid train bombing and world trade center attack) on the bank stocks of Greek and the data are taken 10 day before and 10 days after the occurrence of event. Market model and ordinary least square regression technique are used. Results explored negative abnormal returns to world trade center terror, Madrid event did not have any significant impact on Greeks stock market and London terror had negative return before 10 days and positive return after 10 days of event due to the dominating economy of US world trade center had great impact on stocks returns. They suggested that event study methodology is the center of criticism so the further research should be done by using another method to see the impact of terrorism on financial market. Gul et el (2010) examined the impact of terrorism activities of three financial markets that are Karachi Stock Exchange, FOREX and Interbank market, the secondary data are taken separately from each market and the data of KIBOR are taken from monetary management market and domestic market and the primary data were collected from different resources such as news papers from December 2005 to June 2008. Multiple regression models are used in this study. In this study four dummy variables are used; D1 is for personal terrorist activities, D2 for terror activities done in financial and economic cities, D3 is for major activities happened in non financial cities and D4 is for small terror activities happened in small cities. Results explored the insignificant but negative impact of terror activities on FOREX market cause can be interbank data, and all terror events have negative impact on Stock Exchange market. It is suggested that the impact of terror activities on KIBOR is much larger as compared to stock market and the cause can be that bank branch network is found through out the country and stock market is limited to one city so in order to increase the impact of terror on stock market KIBOR rates can be used. Nguyen and Enomoto (2009) examined the impact of terrorist attack on two specific stock markets Pakistan and Iran and the data are taken from Karachi stock exchange and Tehran stock exchange from the period of 1999 to 2008. The GRACH (1, 1) model is used to find out the impact of terrorism on stock index return. In this study seven dummy variables are used; D1 is bombing of USS Cole on October 12, 2000, D2 is world trade center attack on September 11, 2001, D3 is Indonesia bombing on October 12, 2002, D4 is Iraq war on March 20, 2003, D5 is Madrid bombing on March 11, 2004, D6 is London bombing on July 7, 2005 and D7 is bombing of golden mosque from Feb. 22 to 27, 2006. Results explored that London bombing and attack of world trade center had negative impact on stock market returns on both countries, Pakistan and Iran and when we analyze London attack and golden mosque bombing reduced the market returns of Tehran in beginning 10 days of attack. It is suggested that Pakistani investors can consider those events which can have stronger effects on future market returns as compared to Iranian investors. Ahmed and Farooq (2008) examined the effect of al- Qaida terror attack of world trade center on Karachi stock exchange and the data are taken from KSE-100 index and having of daily closing price from the period 1996 to 2007. ARMA (1, 1) modeling and EGEACH model are used. In this study the fluctuation of stock price dynamics is dependent variable and the independent variable is world trade center attack. In order to see the fluctuation data are divided in to four parts pre and post period of 9/11and pre reform and post reform period of 9/11. Results explored that the volatility behavior of post world trade attack is different from pre reform period and post reform period of world trade attack and the risk premium was also become negative after the attack of world trade. Results show the insignificant measures of instability after and before world trade attack. They suggested that the more study of volatility behavior should be done to see effectiveness of the initiatives that are taken by the SECP.
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Straetmans et al (2008) examined the fluctuation of US stock market during the attack of world trade center 19 stock market indexes have been used in this research and the historical time series data are taken from the period of February 1999 to April 2004. The technique proposed by led ford and Tawn that is known as novel multivariate EVT (earned value technique) is used, univariate and bivariate extreme value analysis and peakover-threshold model is used in this research. Results explored that univariate tail explored some positive tools. There is not any upward shift in the new economy due to the wake of 9/11. Gheno and lee (2006) examined the impact of world trade center attack on stock market and the data are taken for the year 2001 of some specific dates. Conventional linear regression is used. In this study only one variable as an independent variable world trade center attack is used and as dependent variable uncertainty of financial market is used. Results show that real estate investment trust has correlation with stock market and the 9/11 attack was not had a significant impact on economy as on stock market because the economy was already suffering and as stock market. Gulley and sultan (2006) examined the impact of terror attack on financial markets of developed countries and effects of terrorism are analyzed on volatility of asset price and the data are collected from different countries indexes( Japan, France, Italy, Germany, UK, Canada, Australia and US) from the period of 1983 to 2005. GRACH modeling technique is used in this research. In this study terrorism activities such as the USS Cole attack and 9/11 attack are taken as independent variables and different things on which the impact of terror has been checked such as interest rates, bond market, assets price, foreign exchange rates are taken as dependent variables. Results explored that terrorist attacks have impact on financial markets. Haque (2005) examined the impact of 9/11 on financial market and worlds economy and the whole data are taken from the period of December 1987 to July 2006. The data are taken from 1986 to 2001 except BRIC and including BRIC are taken from 1994 to 2001. In order to see the most immediate effect the post data are divided in to more pieces one from September 2001 to December 2003 and second is from January 2004 to July 2006. GARCH (Generalized Autoregressive Conditional Heterocedasticity) framework is used. In this study as variable five regional indexes are used to show the impact of 9/11. Results explored that emerging markets returns are decreasing it is found that overall emerging markets have significant signs of volatility but the impact is not volatile throughout. Johnston and Nedelescu (2005) examined the impact of terror on financial market and the data are taken from the period of 1998 to 2003. GRACH model is used. In this study world trade center attack and different attacks are taken as independent and economic condition taken as dependent variable which is showing the indirect impact of terror on stock market. Results explored that the financial market is directly and indirectly has impact of terrorism activities and US market continuously going down and the decline of European market was visible. Madrid attack was not having any direct impact on stock market of Madrid. Gap is that only two events Madrid and September 11, 2001 impact on financial market is discussed. Bruck and Wickstrom (2004) examined the direct and indirect impact of terrorism on economy and financial market for this purpose the prior data are taken to see the impact of other terrorism activities, the post effects of economic terror activities on financial market of developed and developing countries also have been seen. Results explored that direct impact of terrorism is less important than indirect impact and it is seen that bad policies usually enhance the negative impact of terrorism. It is suggested that further studies should be conducted in context of Iraq and Pakistan because in these countries study on this topic is under-researched and for better understanding the data of new terrorism activities and the new data of different firms should be considered that would help to see the different impact of terrorism at micro level. Eldor and Melnick (2004) examined the impact of terrorism (Palestinian terror attacks done after 2007) on Israels stock market and the daily time series data are used from the period of 1990 to 2003. Regression technique is used in this research with dummy variables. In this study variables are; log of exchange rate and log of stock market index as dependent variables. Results concluded that these attacks have continuously negative impact on Israel stock market but when we analyze currency market so there is not a negative impact, these losses of stock market show the loss of firms profitability. Suicide attacks have impact on both markets but other attacks do not have.
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Brown et al (2003) examined the impact of terrorism on different industries stock price s and for this purpose thirteen events are used in this study, the data of all events are taken from the period of October 2001 to November 2002. Market model approach, event study and multiple regression analysis are used in this research. In this study different industries and their stocks prices are used as dependent variables and different terrorist events are used as independent variables. Results explored that stock prices reacted negatively to most events. It is found that those industries which have been taken in this study, analysis of the same have negative impact on their stock price. Maillet and Michel (2002) examined the impact of world trade center attack on financial markets and the data are taken from October 1987 to 1929. In this study the indicator is index of market shocks. Indexes are taken as dependent variable and 9/11 shock is taken as independent variable. Results explored that this attack of 9/11 had an impact on stock market. It is suggested that the strength of indicator which is IMS should allow for natural extensions either as risk scale on single or portfolio stocks. 3. Methodology In this study quantitative approach are used. This research technique is most commonly used in social sciences. The purpose of this research is explanatory and this research is done to explain the reaction of stock markets prices to different terrorist events. This research explains the reasons in detail and clears the ambiguous problems. Co relational research design is used to see the relationship between variables. Secondary, time series data are used from the period of 2004 to 2010 of KSE-30 index and Regression analysis is used to see the impact of independent variable on dependent variable. Terrorism is taken as independent variable and stock market returns are taken as dependent variable. Model Log (SR) = a0 + a1AS1 + a2BM2 + a3HT3 + a4IA4+ t Log (SR) = a0 + a1TE + t Whereas; SR represent stock return of 30 companies individually that have been taken from Karachi-30 index, a0 is Constant, AS is assassination, BM is bombing, HT is hostage taking, IA is infrastructure attacks and I is Error term. In equation 2: TE represents all four activities. These are combined to see the combined impact of terrorism. 4. Data Analysis This chapter will explore the study of data. This study is done to see the combined impact of four terrorist activities on Karachi stock exchange returns. The most affected firm is being placed on top and the least affected is placed in the last. 4.1. Results and Estimations: As it has been explained that regression model has been used in this study on each company to accurately see the combined impact of independent variable (terrorism) on dependent variable that is companies stock market returns. Test of regression is mentioned in table 4.1. Insert Table 4.1 Here Adjusted R- square shows the change in returns and in table 4.1 the results of the tests are provided. As it is seen maximum value of R square is .2572 for DG khan cement and the least value is -0.0018 for Fauji fertilizers. Insert table 4.2 F and Sig is the F-statistic and the probability connected with it. If the probability value of F is less than 0.05 then terrorism is good predictor of stock prices returns. Same as if the value of P is greater than 0.05 means terrorism is not good predictor of stock market returns. The F-statistic in the model of Unilever is 122.0227 having significant p-value 0.000 which shows that terrorism is good predictor of stock returns. All the companies represent the p-value 0.00 which shows the significance of independent variable. Only hub power and FFBQ show that the terrorism is not good predictor for stock price returns. Insert Table 4.3 Here The constant value referred as Y intercept, and the value of Y intercept for Uniliver is 770.6291 which describes the evaluation of regression line when it touches the Y axis. It is the forecasted value of stock returns when no
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terror activity exists. The coefficient of terrorism for Uniliver is -34.27539 which shows every unit increase in terrorism cause to decrease 34.27539 units in stock returns, while all other variables are constant. Cofficient of nestle shows -15.988 increase in terrorism cause to decrease in 15.988 units in stock return. The most affected firm with terrorism is uniliver and the least affected firm is lotte because its cofficient is -0.003 which means increase in every unit in terrorism cause to decrease 0.003 unit in its stock return. Granger Causality Analysis: By applying the granger (1969) causality analysis the direction of causality is checked between independent and dependent variable. In order to determine the causality analysis we used different lag values. Eldor (2004) also used lag values in granger causality test. Insert Table 4.4 Here Granger causality results show bidirectional relation between independent variable (terrorism) and dependent variable (stock returns). Results of granger causality placed in table 4.4. 5. Conclusion and Recommendations 5.1 Conclusion This study examine the impact of terrorism on stock returns and t o find out the combined effect of terrorist activities on stock returns, four variables are selected, bombing, armed isolation, assassination and hostage taking. Data have been taken from KSE -30index (Karachi Stock Exchange). To make this effort successful, time series, monthly data of these 30 companies have been gathered covering period from 2004 to 2010. Regression analysis and granger causality have been applied to analyze the impact of terrorism on stock returns of listed companies with KSE-30 index. We found stock return reacts negatively to terrorist activities but variation insignificance do exist in literature. The results of this research support the prior studies. 5.2. Recommendation: During the study we analyzed the way by which companies can enhance their returns. Due to unambiguous situation every activity of terrorism cannot be predicted. Companies should concentrate on the analysis of terrorism. Companies should hire people to closely work and analyze on federal, local and business level. Once companies are aware with their structured and unstructured situations then they can take better steps to save companies returns and can make better policies. In order to save the companies from losses, precautionary step reports on cost reducing techniques should be provided which will not only benefit the firms but in case of any unambiguous situation the returns will support the firms operation. At local level there are many departments and individuals who provide information regarding potential terrorism. Policies should be formed to deal with anti terrorism. There are only four variables, which have been taken to see the combined impact of terrorism on stock returns, more variables can be taken to analyze the combined impact of terrorism on stock returns. The data are taken from KSE-30 index which represent the results of thirty firms, more recent and wide range of data would be beneficial for more accurate results. Comparison can be done between different countries. References Ahmed, I., Nawaz1, M. M., & Qazi, T. F. ( 2011 , July). Impact Of Terrorism On Tourism Industry: A Point To Ponder. International Journal Of Academic Research , P. Part I Vol. 3. No. 4. Brown, J. R., Cummins, J. D., Lewis, C. M., & Wei, R. ( 2003, November 4). An Empirical Analysis Of The Economic Impact Of Federal Terrorism Reinsurance. Financial Institution Center , Pp. 19104-6218. Brck, T., & Wickstrm, B. A. ( 2004, April). The Economic Consequences Of Terror: A Brief Survey. Households In Conflict Network , P. Working Paper 03. Christofis, N., Kollias, ,. C., Papadamou, S., & Stagiannis, A. ( 2010, April). Terrorism And Capital Markets: The Effects Of The Istanbul Bombings. Economics Of Security Working Paper 31 .
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Eldor, R., & Melnick, R. (2004, April 20). Financial Markets And Terrorism. European Journal Of Political Economy , Pp. 367386. Gheno, A., & Lee, S. L. (2006, November). The Impact Of 9/11 On Us Reit Returnes: Fundamentals And Financial. International Journal Of Strategic Management , Pp. 209-216. Gul, T., Hussain, A., Bangash, S., & Khattak, S. W. (2010). Impact Of Terrorism On The Financial Markets Of Pakistan. European Journal Of Social Sciences Volume 18, Number 1 . Gulley, O. D., & Sultan, J. (2006, November ). Risk Premium, Volatility, And Terrorism: New Evidence. Haque, M. ( 2009, March). Impact Of September 11, 2001 (9/11) In The Emerging Markets Stock Volatility. Research Buzz Volume 5, Issue 3 . Johnston, R. B., & Nedelescu, O. M. ( 2005, March). The Impact Of Terrorism On Financial Markets. International Monetary Fund , P. Imf Working Paper/05/60. Maillet, B., & Michel, T. ( 2002, January). How Deep Was The September Stock Exchange Crisis? Putting Last Events Into Perspective On The American And French Stock Markets With An Index Of Market Shocks. Pp. Jel Classification: G.10, G.14. Nguyen, A. P., & Enomoto, C. E. ( 2009, December). Acts Of Terrorism And Their Impacts . International Business & Economics Research Journal On Stock Index Returns And Volatility: The Cases Of The Karachi And Tehran Stock Exchanges , Pp. Volume 8, Number 12. Straetmans, S. T., Verschoorb, W. F., & Wolff, C. C. ( (2008)). Extreme Us Stock Market Fluctuations In The Wake Of 9/11. Journal Of Applied Econometrics , Pp. J. Appl. Econ. 23: 1742. Appendix Table 4.1: Name of Companies D.G. Khan Cement Co. Limited PTCL Pakistan State Oil Co. Limited. Fauji Fertilizer Company Millat Tractors limited. National Refinery limited. Unilever Pakistan Bank Alfalah Limited Pakistan Oil fields limited. Engro Corporation (Pak) imited Dawood Hercules Corp. I.C.I Pakistan limited. Nestle Pakistan limited. Pak Petroleum limited. Oil & Gas Dev. Co MCB Bank Limited Attock Petroleum limited Attock Refinery limited. Adamjee Insurance Co. limited. United Bank limited. Nishat Mills limited National Bank Of Pakistan Lotte Pak PTA limited. Adj R-Square 0.257273 0.239139 0.187818 0.186464 0.184218 0.179782 0.178757 0.174062 0.170464 0.168556 0.167751 0.162171 0.157101 0.153 0.151351 0.131885 0.131548 0.115253 0.163642 0.076141 0.07578 0.060527 0.052967
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Habib bank limited Arif Habib Corporation Lucky Cement Limited Kot Addu Power Bank ALHabib Limited Hub Power Company Limited Fauji Fertilizer Bin Qasim Table 4.2: Name of Companies D.G. Khan Cement Co. Limited PTCL Pakistan State Oil Co. Limited. Fauji Fertilizer Company Millat Tractors limited. National Refinery limited. Unilever Pakistan Bank Alfalah Limited Pakistan Oil fields limited. Engro Corporation (Pak) imited Dawood Hercules Corp. I.C.I Pakistan limited. Nestle Pakistan limited. Pak Petroleum limited. Oil & Gas Dev. Co MCB Bank Limited Attock Petroleum limited Attock Refinery limited. Adamjee Insurance Co. limited. United Bank limited. Nishat Mills limited National Bank Of Pakistan Lotte Pak PTA limited. Habib bank limited Arif Habib Corporation Lucky Cement Limited Kot Addu Power Bank ALHabib Limited Hub Power Company Limited Fauji Fertilizer Bin Qasim

0.050094 0.043437 0.04016 0.027985 0.005839 0.002618 -0.0018
F-statistic (Prob) 27.32557 (0.000) 23.62959(0.0000) 129.5759 (0.000) 128.6651 (0.000) 126.555 (0.000) 122.8683 (0.000) 122.0227 (0.000) 16.1736 (0.000142) 114.8433 (0.000) 113.7158 (0.000) 113.0691 (0.000) 108.62 (0.000) 104.6284 (0.000) 101.4347 (0.000) 100.1588 (0.000) 85.4683 (0.000) 85.21994 (0.000) 73.42852 (0.000) 4.717552 (0.04346) 46.82348 (0.000) 7.231680 ( 0.00882) 5.896402(0.0175) 5.586208 (0.000) 30.32081 (0.000) 26.24764 (0.000) 4.18017 (0.0444) 17.00746 (0.00004) 4.265522 (0.039357) 2.459563 (0.117381) 0.001097 (0.973586)
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Table 4.3:
UnileverPakistan Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -34.27539 -11.0464 0.0000 0.178757 C 770.6291 15.16453 0.0000 D.G. Khan Cement Co. Limited Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -33.4307 -5.22739 0.0000 0.257273 C 108.7908 9.548736 0.0000 National Bank Of Pakistan Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -24.71333 -2.42825 0.0176 0.060527 C 113.1012 6.237985 0.0000 Lucky Cement Limited Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -18.19157 -2.04455 0.0444 0.04016 C 100.6853 6.35196 0.0000 Pakistan State Oil Co. Limited. Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -4.040242 -11.3831 0.0000 0.187818 C 111.7128 19.21778 0.0000 NestlePakistanlimited. Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -15.98825 -10.2288 0.0000 0.157101 C 371.9345 14.52901 0.0000 Adamjee Insurance Co. limited. Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -13.70111 -2.17199 0.0435 0.163642 C 66.41864 6.266639 0.0000 Bank Alfalah Limited Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -13.51207 -4.02164 0.0001 0.174062 C 47.87715 8.000592 0 Nishat Mills limited Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -9.449484 -2.68918 0.0088 0.07578 C 67.66873 10.80972 0.0000 PTCL Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -6.304431 -4.86103 0.0000 0.239139 C 17.1372 7.499687 0.0000 Millat Tractors limited. Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -4.440713 -11.2497 0.0000 0.184218 C 120.5332 18.64401 0.0000
Prob(F-statistic) 122.0227 (0.000)
Prob(F-statistic) 5.896402(0.0175)
Prob(F-statistic) 4.717552 (0.04346)
Prob(F-statistic) 16.1736 (0.000142)
Prob(F-statistic) 7.231680 ( 0.00882)
Prob(F-statistic) 23.62959(0.0000)
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Attock Petroleum limited Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -3.798698 -9.23147 0.0000 0.131548 C 106.5401 15.80865 0.0000 Dawood Hercules Corp. Variable Coefficient t-Statistic Prob. Adj R-square TERRORISM -3.247921 -10.6334 0.0000 0.167751 C 94.36804 18.86414 0.0000
Variable Coefficient TERRORISM -3.084293 C 90.84395 National Refinery limited. t-Statistic Prob. Adj R-square -11.0846 0.0000 0.179782 19.93453 0.0000 Pakistan Oil fields limited. t-Statistic Prob. Adj R-square -10.7165 0.0000 0.170464 20.90572 0.0000 MCBBankLimited t-Statistic Prob. Adj R-square -9.24491 0.0000 0.131885 19.14623 0.0000 Engro Corporation (Pak) Limited t-Statistic Prob. Adj R-square -10.6638 0.0000 0.168556 23.30685 0.0000 PakPetroleumlimited. t-Statistic Prob. Adj R-square -10.0715 0.0000 0.153 23.6781 0.0000 Attock Refinery limited. t-Statistic Prob. Adj R-square -8.56904 0.0000 0.115253 22.22375 0.0000 Oil&GasDev.Co t-Statistic Prob. Adj R-square -10.0079 0.0000 0.151351 26.53144 0.0000 Fauji Fertilizer Company t-Statistic Prob. Adj R-square -11.3431 0.0000 0.186464 21.90346 0.0000 Habib bank limited t-Statistic Prob. Adj R-square -5.50643 0.0000 0.050094 17.73854 0.0000
Variable Coefficient TERRORISM -2.32692 C 74.4764 Variable Coefficient TERRORISM -1.963552 C 66.60051 Variable Coefficient TERRORISM -1.67268 C 60.20601
Variable Coefficient TERRORISM -1.427129 C 54.95045
Variable Coefficient TERRORISM -1.152523 C 48.9541 Variable Coefficient TERRORISM -1.101806 C 47.83833 Variable Coefficient TERRORISM -0.938752 C 29.66222 Variable Coefficient TERRORISM -0.771686 C 40.71386
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Variable Coefficient TERRORISM -0.704469 C 39.1285 Variable Coefficient TERRORISM -0.434268 C 33.20591 Variable Coefficient TERRORISM -0.260134 C 24.98411


No 1 Name of Company Bank Alfalah Limited
UnitedBanklimited. t-Statistic Prob. Adj R-square Prob(F-statistic) -6.84277 0.0000 0.076141 46.82348 (0.000) 23.20645 0.0000 ArifHabibCorporation t-Statistic Prob. Adj R-square Prob(F-statistic) -5.12325 0.0000 0.043437 26.24764 (0.000) 23.78749 0.0000 Fauji Fertilizer Bin Qasim t-Statistic Prob. Adj R-square Prob(F-statistic) -4.28642 0.0000 -0.001803 0.001097 (0.973586) 22.31518 0.0000 Kot Addu Power t-Statistic Prob. Adj R-square Prob(F-statistic) -4.12401 0.0000 0.027985 17.00746 (0.00004) 31.17463 0.0000 Bank ALHabib Limited t-Statistic Prob. Adj R-square Prob(F-statistic) -2.06531 0.0394 0.005839 4.265522 (0.039357) 31.25137 0.0000 HubPowerCompanyLimited t-Statistic Prob. Adj R-square Prob(F-statistic) -1.5683 0.1174 0.002618 2.459563 (0.117381) 31.07614 0.0000 Lotte Pak PTA limited. t-Statistic Prob. Adj R-square Prob(F-statistic) -2.094 0.039 0.052967 5.586208 (0.000) 11.269 0.0000
Table 4.4: Null Hypothesis TERRORISM does not Granger Cause RETURN RETURN does not Granger Cause TERRORISM F-statistic 0.68737 3.61961 3.75253 6.77097 0.3761 1.83468 Probability 0.4102 0.0617 0.0564 0.0111 0.9291 0.0888
D.G. Khan Cement Co. Limited
TERRORISM does not Granger Cause RETURN RETURN does not Granger Cause TERRORISM
National Bank Of Pakistan
Engro Corporation (Pak) Limited
0.00814 6.68678 3.21428 1.81926
0.9283 0.0116 0.0776 0.182
Nishat Mills limited.
83

6 Lucky Cement Limited

8.62871 0.35763 0.0097 5.20028 5.73554 0.16687 0.47174 3.53796 2.85174 0.60634 1.4516 3.94973 3.39754 0.85536 0.0046 0.5519 0.9219 0.0258 0.0195 0.6842 0.7029 0.019 0.0223 0.6953 0.2354 0.0117 0.0038 0.61
PTCL
Arif Habib Corporation
Fauji Fertilizer Company
10
Lotte Pak PTA limited.
11
Fauji Fertilizer Bin Qasim
12
Pakistan Oil fields limited.
13
Adamjee Insurance Co. limited.
TER does not Granger Cause RETURN RETURN does not Granger Cause TER
5.27253 2.82314 7.08669 0.93701 4.30443 0.69464 0.48414 3.61283 0.20573 3.01294 0.01026 3.39473 6.67536 0.04514 3.22792 1.92103
0.0405 0.1187 0.0097 0.3366 0.0419 0.4076 0.489 0.0617 0.6514 0.0865 0.9196 0.0693 0.012 0.8324 0.077 0.1704
14
Attock Refinery limited.
15
MCB Limited
16
Pak Petroleum limited.
17
Oil & Gas Dev. Co
18
Hub Power Company Limited
19
United Bank limited.
20
Habib bank limited
84
21
Pakistan State Oil Co. Limited.
12.2202 3.91569 0.67015 1.89535 10.2586 0.52622 7.51887 0.36903 5.64963 2.35581 0.72223 1.83638 4.11156 1.44878 3.52E+00 4.17223 1.40747 3.18649 0.91008 2.4597
0.0127 0.0963 0.8108 0.0967 0.0021 0.4708 0.0079 0.5456 0.0204 0.1296 0.6709 0.095 0.0461 0.2325 0.0642 0.0444 0.2397 0.0788 0.4638 0.0546
22
Bank ALHabib Limited
23
Attock Petroleum limited
24
Dawood Hercules Corp.
25
National Refinery limited.
26
Kot Addu Power
27
I.C.I Pakistan limited.
28
Millat Tractors limited.
29
Unilever Pakistan
30
Nestle Pakistan limited.
85

Impact of Terrorism On Stock Return

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Universal Journal of Management and Social Sciences

Vol. 2, No.8; August 2012