Impact of Non-Financial Factors on Stock Exchange Performance (An Empirical Analysis of KSE-100 Index)

Abstract

This study examined the impact of non-financial factors including terrorism,
political instability & natural disasters on Karachi stock exchange-100 index
performance. Terrorism was measured in terms of bombing, target killing &
kid-napping while strikes & judiciary decisions were taken as political
instability. Natural disasters were observed in forms of floods & earthquakes.
Time series data on daily basis from KSE-100 index was gathered covering
period from 2005 to 2014. OLS method was applied to investigate the impact of
non-financial factors on stock exchange performance. It was observed that
earthquakes and judiciary decisions had significant negative effect onKSE-100
index while floods, kidnapping and strikes had negative but insignificant effect
on KSE-100 index. However KSE-100 index did not react to bombing or target
killing at even 10 % level of significance but the stock market reaction was more
significant to judiciary decisions as compare to other events.