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

Authors

  • 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

Keywords:

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

Abstract

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.

https://doi.org/10.5281/zenodo.10492281

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Published

2023-09-30

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

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