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The impact of terrorism on industry returns and systematic risk in Pakistan: A wavelet approach

Shahzad, Syed Jawad Hussain and Stauvermann, P.J. and Kumar, Ronald R. and Ahmad, Tanveer (2017) The impact of terrorism on industry returns and systematic risk in Pakistan: A wavelet approach. Accounting Research Journal, 30 (4). pp. 413-429. ISSN 1030-9616

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    Abstract

    Purpose This study aims to examine the impact of terrorism on return and systematic risk of Pakistan’s equity industries. Daily data from 1 January 2000 to 31 December 2014 for 12 industries based on the specific types of companies listed on Karachi Stock Exchange are used for the empirical analysis. Design/methodology/approach A multiplicative (additive) term is introduced in the standard capital asset pricing model to examine the change in systematic risk (industry returns) in response to the terrorist activities. The authors use the multiscale beta approach (Yamada, 2005) and the maximal overlap discrete wavelet transform (MODWT) to test the heterogeneous market hypothesis. Findings Terrorism activities increase the systematic risk for most of the industries and the negative impact on returns of banks and the financial industry. It is noted that terrorism positively impacts (increases) the industrial systematic risk mainly in short-run (between two and four days-time horizon). Originality/value The paper examines the impact of terrorism on a broad list of industries’ (banks, basic materials, chemicals, construction, consumer goods, consumer services, financials, industrials, minerals, oil and gas, textile and utilities) risk and return in Pakistan, using the multiscale beta approach (Yamada, 2005) and the MODWT methods.

    Item Type: Journal Article
    Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
    H Social Sciences > HG Finance
    Divisions: Faculty of Business and Economics (FBE) > School of Accounting and Finance
    Faculty of Business and Economics (FBE)
    Depositing User: Ronald Kumar
    Date Deposited: 16 Nov 2017 19:47
    Last Modified: 16 Nov 2017 19:47
    URI: http://repository.usp.ac.fj/id/eprint/10366
    UNSPECIFIED

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