BS ECONOMICS

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Browsing BS ECONOMICS by Author "Aariz Raza Khan"

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    PAKISTAN ECONOMY, DETERMINANTS AND ASYMMETRIC EFFECTS ON CAPITAL MARKETS
    (UMT, Lahore, 2021) Aariz Raza Khan
    Efficient capital markets inherently contain systematic risk and rapidly reflect real economic changes that ultimately affect the profits of the companies listed on the exchanges and future performance of the companies and usually economic indicators like gross domestic product, inflation, and other crucial factors that are publicly disseminated through state weekly, monthly, quarterly, and annual statistical reports that tend to be lagging the stock indices in general, except for few economic indicators that tend to have predictive powers. Moreover, Pakistan being a developing economy has efficiency concerns as well since most developed nations tend to have efficient markets as explained by Fama and French in their EMH theory. For this reason, this dissertation analyzes the relationship among exogenous economic indicators and the endogenous stock returns both in the short and long run. Along with that this paper analyzes efficiency of the markets as well. The first part of the overall analysis is about statistically significant relationships using Pearson’s correlation matrix for all economic and financial variables that indicates that most variables are insignificant when correlated but impact on stock indices is significantly present when regressed with lags, and for this reason a robust non-linear autoregressive distributed lag (NARDL) model has been applied to better understand the relationships between exogenous and endogenous stock indices. The study tests the asymmetry in effects of economic and financial variables on KSE-100 stock index, showing that only CPI, exchange rates and UK stock index have asymmetry effects, while others have symmetry effects. Correlation matrix suggests most variables are insignificant except for oil, exchange rates, 1-year treasury rate and stock indices.