Impact of Terrorism, Economic and Noneconomic Factors on PSX

Abstract

This study investigates the impact of economic factors and noneconomic factors
on the Pakistan Stock Exchange (PSX) from 2000 to 2017. Noneconomic factors
in this study are terrorism and political system while economic factors are
foreign exchanges rate, gold prices, and global financial stress. 5 models are
developed and run to check the impact of individual factors explicitly. The
finding of this study suggests that both economic factors and noneconomic
factors have impact on PSX like terrorism significantly diminishes PSX returns. In
democratic political system, investor feels confident which positively influences
the PSX return. FX movement displayed negative significant relationship with
PSX. Due to lack of education about the portfolio management, investors of PSX
are not considering gold as risk diversifier. Global financial stress has
substantially reduced PSX return confirming integration between PSX and
global financial markets.