Influence of political stability on the stock market returns and volatility:GARCH and EGARCH approach  

作　　者：Wajid Alim Naqib Ullah Khan Vince Wanhao Zhang Helen Huifen Cai Alexey Mikhaylov Qiong Yuan 

机构地区：[1]Lahore School of Acountancy and Finance,University of Lahore,Lahore,Punjab,Pakistan [2]School of Public Administration,Central South University,Yuelu District,Changsha 410017,Hunan,China [3]University College London,London WC1E6JA,UK [4]Middlesex Business School,Middlesex University,The Burroughs,Hendon,London NW44BT,UK [5]Department of Financial Technologies,Financial University Under the Government of the Russian Federation,Moscow,Russia [6]Hunan Institute of Engineering Management School,411104 No.88 Fuxing Middles RD.,YuetangDistrict,Xiangtan 411104,Hunan Province,China [7]Western Caspian University,Baku,Republicof Azerbajan

出　　处：《Financial Innovation》2024年第1期146-162,共17页金融创新(英文)

摘　　要：Political instability has increased drastically in Pakistan during the last few decades.This may intensify the fear of investors and eventually affect investment decisions.Therefore,the stock market’s reaction to political stability must be explored and appropriate policy measures should be prescribed.This paper examines the effect of political stability on stock market returns and volatility using time series data from Pakistan for the period from January 02,2004,to May 31,2018.The study uses the Generalized Autoregressive Conditional Heteroskedastic(GARCH)and Exponential Generalized Autoregressive Conditional Heteroskedastic(EGARCH)models to achieve the main objectives.The findings of the GARCH and EGARCH models confirm that political stability has a positive and significant influence on both stock market returns and volatility in Pakistan.In addition,the EGARCH findings indicate that negative shock(political instability)creates more volatility in the stock market than positive shock(political stability).The results of this study reveal that financial market investors are affected more by political instability.In conclusion,this study suggests that political stability is an essential factor affecting financial market volatility,and it leads to stable financial markets.It also emphasizes that political instability needs to be resolved to achieve stable financial markets.

关 键 词：GARCH Political stability Stock returns VOLATILITY Pakistan 

分 类 号：F22[经济管理—国民经济]