Evaluation of the Integration of Pakistan Stock Market with Selected Asian Stock Market


  • Muhammad Sohail Lecturer University of Swat, PhD Scholar Qurtuba University of Science & Technology, Peshawar. Author
  • Dr. Shams Ur Rahman Assistant Professor, The University of Agriculture, Peshawar. Author
  • Dr. Sajid Rahman Assistant Professor, The University of Agriculture, Peshawar. Author


Pakistan Stock Exchange (PSX), Asian Stock Market, liberalization, Market Integration, PSX-100


This study investigated the cointegration of the PSX-Asian stock market. The study hypotheses were tested using the closing monthly data of the returns of selected stock market spanning from January 2001 to December 2020. This data was collected from reputable sources such as Yahoo Finance, Business Recorders, and the World Bank. This study examines nine Asian stock markets, selected based on data availability, using the MSCI (Morgan Stanley Capital International) index as a benchmark. The research employed time-series diagnostics. The Pakistan Stock Exchange (PSX) demonstrates heightened volatility and yields relatively superior returns in comparison to other Asian markets. The PSX demonstrates a restricted correlation with the majority of Asian stock markets. The results of the ADF (augmented Dickey-Fuller) and PP (Phillip Peron tests) suggest that the data exhibits stationarity following a first-order differencing. The analysis of cointegration reveals the presence of three distinct patterns of cointegration among variables or series related to the Asian stock market. The subsequent utilization of the Granger causality test aimed to investigate the temporal link between the stock market return series. A lead-lag relationship can be observed between the PSX and specific markets. The research employs a vector error correction model to quantify the rate at which shocks are adjusted. The results indicate that PSX demonstrates a rapid adaptability to various stock markets in Asia. The research employs an impulse response analysis to visually evaluate the rate of adjustment.



Aamir, M., & Ali Shah, S. Z. (2018). Determinants of stock market co-movements between Pakistan and Asian emerging economies. Journal of Risk and Financial Management, 11(3), 32.

Ahmed, K., Khan, B., & Ozturk, I. (2021). Dynamics between disaggregates of governance and stock market performance in selected South Asia countries. International Journal of Finance & Economics, 26(1), 802-813.

Akhtar, S., & Khan, N. U. (2016). Modeling volatility on the Karachi stock exchange, Pakistan. Journal of Asia Business Studies, 10(3), 253-275.

Awan, T., Shah, S. Z. A., Khan, M. Y., & Javeed, A. (2020). Impact of corporate governance, financial and regulatory factors on firms’ acquisition ability. Corporate Governance: The International Journal of Business in Society.

Bekaert, G., & Harvey, C. R. (1997). Emerging equity market volatility. Journal of Financial economics, 43(1), 29-77.

Bekaert, G., & Harvey, C. R. (2002). Research in emerging markets finance: looking to the future. Emerging markets review, 3(4), 429-448.

Bekaert, G., Harvey, C. R., & Lundblad, C. T. (2003). Equity market liberalization in emerging markets. Journal of Financial Research, 26(3), 275-299.

Berkman, H., & Eleswarapu, V. R. (1998). Short-term traders and liquidity:: a test using Bombay Stock Exchange data. Journal of financial Economics, 47(3), 339-355.

Bibi, R., Akhtar, K., & Raza, N. (2021). The integration and efficiency of BRICS and Pakistan stock markets: An analysis using asymmetric cointegration and MF-DFA approaches. IBA Business Review, 16(1).

Blackburn, D. W., & Chidambaran, N. K. (2015, June). Measuring Market Integration: US Stock and REIT Markets. In Computing in Economics and Finance (pp. 223-250). Springer, Cham.

Chang, B. H., Meo, M. S., Syed, Q. R., & Abro, Z. (2019). Dynamic analysis of the relationship between stock prices and macroeconomic variables: An empirical study of Pakistan stock exchange. South Asian Journal of Business Studies.

Chow, H. K. (2017). Volatility spillovers and linkages in Asian stock markets. Emerging Markets Finance and Trade, 53(12), 2770-2781.

Darrat, A. F., & Zhong, M. (2002). Permanent and transitory driving forces in the Asian‐Pacific stock markets. Financial Review, 37(1), 35-51.

Demirgüç-Kunt, A., & Levine, R. (1996). Stock markets, corporate finance, and economic growth: an overview. The World Bank Economic Review, 10(2), 223-239.

Ghafoor, M. M., Hussain, Z., & Saeed, M. Y. (2020). The Impact of China-Pak Economic Corridor (CPEC) on Pakistan Stock Exchange (PSX). Journal of Business and Social Review in Emerging Economies, 6(4), 1323-1333.

Gulzar, S., Mujtaba Kayani, G., Xiaofen, H., Ayub, U., & Rafique, A. (2019). Financial cointegration and spillover effect of global financial crisis: A study of emerging Asian financial markets. Economic research-Ekonomska istraživanja, 32(1), 187-218.

Han Kim, E., & Singal, V. (2000). Stock market openings: Experience of emerging economies. The Journal of Business, 73(1), 25-66.

Harvey, C. R. (1995). The risk exposure of emerging equity markets. The world bank economic review, 9(1), 19-50.

Hussin, M. Y. M., Muhammad, F., Awang, S. A., Marwan, N. F., & Abdul Razak, A. (2013). The dynamic interaction between islamic stock market and strategic commodities. Journal of Islamic Economics, Banking and Finance, 113(915), 1-16.

Iqbal, R. (2008). Ownership concentration, corporate governance and firm performance: Evidence from Pakistan. The Pakistan Development Review, 643-659.

Joyo, A. S., & Lefen, L. (2019). Stock market integration of Pakistan with its trading partners: A multivariate DCC-GARCH model approach. Sustainability, 11(2), 303.

Khan, F., Bangash, R., & Khan, M. M. (2018). Dynamic Linkage among Pakistan, Emerging and Developed Equity Market. FWU Journal of Social Sciences, Summer, 237-246.

Kim, D. (2010). Information uncertainty risk and seasonality in international stock markets. Asia‐Pacific Journal of Financial Studies, 39(2), 229-259.

Kiran, F., Khan, N. U., & Shah, A. (2020). The herding behaviour on Pakistan stock exchange–using firm-level data. Afro-Asian Journal of Finance and Accounting, 10(1), 71-84.

Korajczyk, R. A. (1996). A measure of stock market integration for developed and emerging markets. The World Bank Economic Review, 10(2), 267-289.

Lamba, A. S. (2003). Analysis of the dynamic relationships between South Asian and Developed Equity Markets, University of Melbourne. Accessed on, 5.

Maher, M. R., Asif, M., & Batool, S. N. (2017). Dynamic linkages among selected South Asian countries stock markets. Journal of Business & Financial Affairs, 6(4), 1-6.

Naz, F., Mohsin, A., & Zaman, K. (2012). RETRACTED: Exchange rate pass-through in to inflation: New insights in to the cointegration relationship from Pakistan.

Sadaqat, M., & Butt, H. A. (2017). Role of liquidity in explaining anomalous returns: evidence from emerging market. Business & Economic Review, 9(3), 1-35.

Shah, J., & Shah, A. (2018). Contrarian and momentum investment strategies in Pakistan stock exchange. The Pakistan Development Review, 253-282.

Shah, S. Z. A., & Hussain, Z. (2012). Impact of ownership structure on firm performance evidence from non-financial listed companies at Karachi Stock Exchange. International Research Journal of Finance and Economics, 84(3), 6-13.

Singh, R. (2011). Equity investment culture and entrepreneurship-culture-initiation and adaptation. Pacific Business Review International, 4(1), 66-71.

Subhani, M. I., Hasan, S. A., Mehar, D., & Osman, M. (2011). Are the major South Asian equity markets co-integrated?. International Journal of Humanities and Social Science , Vol. 1, No. 12 (2011): pp. 117-121.

Syed, F., & Khan, N. U. (2017). Islamic calendar anomalies: evidence from Pakistan. Business & Economic Review, 9(3), 104-122.

Tauseef, S., & Dupuy, P. (2022). Pakistan: a study of market's returns and anomalies. Journal of Economics, Finance and Administrative Science.

Ullah, G. M. W., Islam, A., Alam, M. S., & Khan, M. K. (2017). Effect of macroeconomic variables on stock market performance of SAARC countries. Asian Economic and Financial Review, 7(8), 770-779.

Ullah, S., & Kamal, Y. (2017). Board characteristics, political connections, and corporate cash holdings: The role of firm size and political regime. Business & Economic Review, 9(1), 157-179.

Wahid, A. (2018). The Paradigm Shift in the Pakistan Stock Exchange’s Financial Integration Post-FTA and CPEC Abdul Wahid and Muhammad Zubair Mumtaz. Lahore Journal of Economics, 23(1), 21-50.

Zaheer, A., & Kiran, N. (2020). the impact of macroeconomic variables on stock prices in Pakistan. International Journal of Management (IJM), 11(11).




How to Cite

Evaluation of the Integration of Pakistan Stock Market with Selected Asian Stock Market. (2023). International Research Journal of Management and Social Sciences, 4(3), 12-27. https://irjmss.com/index.php/irjmss/article/view/4

Similar Articles

1-10 of 178

You may also start an advanced similarity search for this article.