Impact of Terrorism on Stock Return
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Transcript of Impact of Terrorism on Stock Return
Universal Journal of Management and Social Sciences Vol. 2, No.8; August 2012
73
Impact of Terrorism on Stock returns: Evidence from Pakistan *Dr Aurangzeb
1, Tasfoura Dilawer
2
1HOD Business Administration, Dadabhoy Institute of Higher Education,
2Research Scholar
Abstract
This study examines the impact of terrorism on stock returns and to find out the combined effect of terrorist
activities on stock returns. Four variables are selected, bombing, armed isolation, assassination and hostage
taking. Data has been taken from KSE -30index (Karachi Stock Exchange). To make this effort successful, time
series, monthly data of these 30 companies have been gathered covering period from 2004 to 2010. Regression
analysis and granger causality have been applied to analyze the impact of terrorism on stock returns of listed
companies with KSE-30 index. We found stock returns react negatively to terrorist activities but variation in
significance do exist in literature. It is recommended that companies should hire people to closely work and
analyze on federal, local and business level. Once companies are aware with their structured and unstructured
situations then they can take better steps to save companies’ returns and can make better policies.
Keywords: KSE-30 index, stock price return, terrorism, granger causality.
1. Introduction
The word terrorism was initially heard during the French revolution in late 1700. It is defined as planned and
deliberately done murder.1Many researches have been done to see the impact of terrorism on different
industries and financial markets. The impact of terrorism is a terrible risk. Terrorism has great effect on every
one’s life either directly or in directly. Many economies are under serious constraint due to terrorism including
Pakistan, Iran, Jordan, Kuwait, Yemen and US. The attack on world trade center by Al-Qaeda.can be termed as
the single most important factor that changed the whole world. There are many acts of terrorism such as
bombing of Indonesia and Madrid, secondly the attack that has been done on USS Cole in Yemen and an attack
of world trade center in US. Due to all these activities economy of many countries got affected. As we know
that the finance markets of the whole world are interrelated and any disaster activity in one country must
affect another. In this research paper we tried to explore the impact of terrorist activities on specific country
that is Pakistan. We can expect Pakistan will have different impact of terror on stock returns from others,
because it depends on that which country is trading with whom and which nation was attacked as we take
the example of US world trade center those countries who do trading with US will be more affected than
others who do not.
1.1. Background
Terrorist activities are normally reason to generate the unfavorable short term reaction in financial markets.2 If
we compare the impact of terrorism on long run and short run, the evidences state that impact on return is
not forceful in long run as compared to short term.3 Researchers have exposed that the terrorism has a
negative impact on stock returns and it is also found that terrorism has significant negative impact on the
value of KSE 100 index.4 (Gul 2010) analyzed the impact of terrorist activities of three financial markets that
are Karachi Stock Exchange, FOREX and Interbank market are examined and it is found that there is an
insignificant but negative impact of terror activities on FOREX market, cause can be interbank data, and all
terror events have negative impact on Stock Exchange market.5
Chesney, M., Reshetar, G., & Karaman, M. (2010), proposed diversification strategies to reduce the impact of
terrorism. Some assets should be held that can react positively against the negative reaction of stock markets
and it is mentioned that the reaction of gold market is the most negative to terrorist attacks than other
1 Lila Perl
2 Chen, A. H., & Siems, T. F. (2004, March)
3 Abadie, A., & Gardeazabal, J. ( 2003, Mar)
4 Eldor, R., & Melnick, R (2004)
5Gul, T., Hussain, A., Bangash, S., & Khattak, S. W. (2010)
Universal Journal of Management and Social Sciences Vol. 2, No.8; August 2012
74
markets. Based on this, it was suggested that investment should be done in commodities rather in gold
market.6
In Pakistan, a very few researches have been conducted on this topic, and the result explored no effect of
internal terror activities on stock market. The purpose of this study is to find out the combined impact of
internal terrorist activities with recent data on Pakistani stock returns.
1.3. Research objective:
The primary objective of this research is to see the combined impact of different recent internal
terrorist activities on stock returns and to find out which company’s return has suffered the most. For this
purpose four activities are combined, (target killing, bombing, armed isolation and hostage taking) as one
variable.
2. Literature Review
2.1 Theoretical Background
The core objective of terrorism is to influence the government and it’s a deliberate act that creates fear,
violence and anxiety among people. Terrorism has direct and indirect impact, direct impacts involve
immediate and quick negative responses of economy and business such as decline in investments, growth and
consumptions of different sectors and long term negative effects on firms, economy and stock markets are
known as indirect effects of terrorism and need government policies to over come these.7
Terrorist activities caused to reduce the investments of delay for long period. The US stock market got close
after world trade center attack for few days, that was a shock for business and industries. It is seen that after
9/11 attacks there was a great decline in tourism, airline and insurance stocks. Due to terrorism great mergers
and acquisitions have been seen.8 Through the event study, it is realized that on the value of insurance
companies there is a negative impact of World Trade Center Attack. They saw the increase in variance of stock
market, the increase in uncertainty and decrease in capital.9 The negative effects of terrorism on economies
for many countries are not long term and diversified economies have an ability to be strong with terrorism and
terrorism is a cause of re allocation of resources and investments.10
The impact of 9/11 in long run is larger than short run and the stock market reaction was brief but negative to
world trade center attack (WTC), one more reason of the fall of US economy was the little rise in dollar.11
The
European stock market reacted negatively to terrorist activities it is perceived that there was a decline in
earnings on share on response to terrorism.12
Many studies proved the relationship of terrorism and stock market being negative, worse reactions have been
witnessed to bigger terrorism activities (see Drakos, 2009). By diversification, the negative impact of these
activities can be reduced. Terrorism does not have negative impact on currency market (see Eldor & Melnick,
2004). Guidolin & Ferrara, (2005) showed that internal stock markets are more affected than international
markets, with the negative effects. The impact of Terrorism is much larger on KIBOR than stock market (see
Gul et el, 2010). It is found that if in any country terrorist activities play major role to disturb the financial
markets then these activities will also open the door for more terror (see Nguyen & Enomoto 2009). In such
conditions some financial tool like bonds that are connected with terror events, volatility options and
insurance programs that are introduced to facilitate the investor after terrorism can be helpful to reduce the
market crash and the cost of terrorism that is assessed in loss than the original.
2.2 Empirical Studies
Ahmed et al (2011) examined the reaction of tourism industry to terrorist activities and to see the impact the
data are taken from the period of 1990 to 2010. This study is a conceptual study. In this study tourism industry
6 Chesney, M., Reshetar, G., & Karaman, M. (2010)
7 Gabriele G. S. Suder,
8 Business confronts terrorism: risks and responses By Dean C. Alexander
9 W. Kip Viscusi
10Philip Keefer and Norman Loayza 11
Harry Ward Richardson, Peter Gordon 12
William L. Megginson, Scott B. Smart
Universal Journal of Management and Social Sciences Vol. 2, No.8; August 2012
75
is taken as dependent variable and terrorism as independent variable. It is analyzed that terrorism has
negative impact on tourism it restricts not only tourists but also businesses to enter in Pakistan.
Christofis et al (2010) examined the impact of Istanbul bombing on stock market of Istanbul and the data are
taken of the year of 1997 to 2009 and included 3391 trading days. Asset pricing model, market model of
McKinley 1997 and daily returns of Dow Jones index is used. To see the impact of three event national-100,
bank index, industrial index, service, tourism and trade index is used. Results explored that 1999 attack had
negative impact except banking, industrial and trade sector. It is explored that in the reaction of 2003 blast
tourism index continuously going down and banking industry fill to 11%.
Liargovas and Repousis (2010) examined the effect of three major events of terrorism (London and Madrid
train bombing and world trade center attack) on the bank stocks of Greek and the data are taken 10 day
before and 10 days after the occurrence of event. Market model and ordinary least square regression
technique are used. Results explored negative abnormal returns to world trade center terror, Madrid event did
not have any significant impact on Greek’s stock market and London terror had negative return before 10 days
and positive return after 10 days of event due to the dominating economy of US world trade center had great
impact on stocks returns. They suggested that event study methodology is the center of criticism so the
further research should be done by using another method to see the impact of terrorism on financial market.
Gul et el (2010) examined the impact of terrorism activities of three financial markets that are Karachi Stock
Exchange, FOREX and Interbank market, the secondary data are taken separately from each market and the
data of KIBOR are taken from monetary management market and domestic market and the primary data were
collected from different resources such as news papers from December 2005 to June 2008. Multiple regression
models are used in this study. In this study four dummy variables are used; D1 is for personal terrorist
activities, D2 for terror activities done in financial and economic cities, D3 is for major activities happened in
non financial cities and D4 is for small terror activities happened in small cities. Results explored the
insignificant but negative impact of terror activities on FOREX market cause can be interbank data, and all
terror events have negative impact on Stock Exchange market. It is suggested that the impact of terror
activities on KIBOR is much larger as compared to stock market and the cause can be that bank branch
network is found through out the country and stock market is limited to one city so in order to increase the
impact of terror on stock market KIBOR rates can be used.
Nguyen and Enomoto (2009) examined the impact of terrorist attack on two specific stock markets Pakistan
and Iran and the data are taken from Karachi stock exchange and Tehran stock exchange from the period of
1999 to 2008. The GRACH (1, 1) model is used to find out the impact of terrorism on stock index return. In this
study seven dummy variables are used; D1 is bombing of USS Cole on October 12, 2000, D2 is world trade
center attack on September 11, 2001, D3 is Indonesia bombing on October 12, 2002, D4 is Iraq war on March
20, 2003, D5 is Madrid bombing on March 11, 2004, D6 is London bombing on July 7, 2005 and D7 is bombing
of golden mosque from Feb. 22 to 27, 2006. Results explored that London bombing and attack of world trade
center had negative impact on stock market returns on both countries, Pakistan and Iran and when we analyze
London attack and golden mosque bombing reduced the market returns of Tehran in beginning 10 days of
attack. It is suggested that Pakistani investors can consider those events which can have stronger effects on
future market returns as compared to Iranian investors.
Ahmed and Farooq (2008) examined the effect of al- Qaida terror attack of world trade center on Karachi stock
exchange and the data are taken from KSE-100 index and having of daily closing price from the period 1996 to
2007. ARMA (1, 1) modeling and EGEACH model are used. In this study the fluctuation of stock price dynamics
is dependent variable and the independent variable is world trade center attack. In order to see the fluctuation
data are divided in to four parts pre and post period of 9/11and pre reform and post reform period of 9/11.
Results explored that the volatility behavior of post world trade attack is different from pre reform period and
post reform period of world trade attack and the risk premium was also become negative after the attack of
world trade. Results show the insignificant measures of instability after and before world trade attack. They
suggested that the more study of volatility behavior should be done to see effectiveness of the initiatives that
are taken by the SECP.
Universal Journal of Management and Social Sciences Vol. 2, No.8; August 2012
76
Straetmans et al (2008) examined the fluctuation of US stock market during the attack of world trade center
19 stock market indexes have been used in this research and the historical time series data are taken from the
period of February 1999 to April 2004. The technique proposed by led ford and Tawn that is known as novel
multivariate EVT (earned value technique) is used, univariate and bivariate extreme value analysis and peak-
over-threshold model is used in this research. Results explored that univariate tail explored some positive
tools. There is not any upward shift in the new economy due to the wake of 9/11.
Gheno and lee (2006) examined the impact of world trade center attack on stock market and the data are
taken for the year 2001 of some specific dates. Conventional linear regression is used. In this study only one
variable as an independent variable world trade center attack is used and as dependent variable uncertainty of
financial market is used. Results show that real estate investment trust has correlation with stock market and
the 9/11 attack was not had a significant impact on economy as on stock market because the economy was
already suffering and as stock market.
Gulley and sultan (2006) examined the impact of terror attack on financial markets of developed countries and
effects of terrorism are analyzed on volatility of asset price and the data are collected from different countries
indexes( Japan, France, Italy, Germany, UK, Canada, Australia and US) from the period of 1983 to 2005. GRACH
modeling technique is used in this research. In this study terrorism activities such as the USS Cole attack and
9/11 attack are taken as independent variables and different things on which the impact of terror has been
checked such as interest rates, bond market, assets price, foreign exchange rates are taken as dependent
variables. Results explored that terrorist attacks have impact on financial markets.
Haque (2005) examined the impact of 9/11 on financial market and world’s economy and the whole data are
taken from the period of December 1987 to July 2006. The data are taken from 1986 to 2001 except BRIC and
including BRIC are taken from 1994 to 2001. In order to see the most immediate effect the post data are
divided in to more pieces one from September 2001 to December 2003 and second is from January 2004 to
July 2006. GARCH (Generalized Autoregressive Conditional Heterocedasticity) framework is used. In this study
as variable five regional indexes are used to show the impact of 9/11. Results explored that emerging markets
returns are decreasing it is found that overall emerging markets have significant signs of volatility but the
impact is not volatile throughout.
Johnston and Nedelescu (2005) examined the impact of terror on financial market and the data are taken from
the period of 1998 to 2003. GRACH model is used. In this study world trade center attack and different attacks
are taken as independent and economic condition taken as dependent variable which is showing the indirect
impact of terror on stock market. Results explored that the financial market is directly and indirectly has
impact of terrorism activities and US market continuously going down and the decline of European market was
visible. Madrid attack was not having any direct impact on stock market of Madrid. Gap is that only two events
Madrid and September 11, 2001 impact on financial market is discussed.
Bruck and Wickstrom (2004) examined the direct and indirect impact of terrorism on economy and financial
market for this purpose the prior data are taken to see the impact of other terrorism activities, the post effects
of economic terror activities on financial market of developed and developing countries also have been seen.
Results explored that direct impact of terrorism is less important than indirect impact and it is seen that bad
policies usually enhance the negative impact of terrorism. It is suggested that further studies should be
conducted in context of Iraq and Pakistan because in these countries study on this topic is under-researched
and for better understanding the data of new terrorism activities and the new data of different firms should be
considered that would help to see the different impact of terrorism at micro level.
Eldor and Melnick (2004) examined the impact of terrorism (Palestinian terror attacks done after 2007) on
Israel’s stock market and the daily time series data are used from the period of 1990 to 2003. Regression
technique is used in this research with dummy variables. In this study variables are; log of exchange rate and
log of stock market index as dependent variables. Results concluded that these attacks have continuously
negative impact on Israel stock market but when we analyze currency market so there is not a negative
impact, these losses of stock market show the loss of firm’s profitability. Suicide attacks have impact on both
markets but other attacks do not have.
Universal Journal of Management and Social Sciences Vol. 2, No.8; August 2012
77
Brown et al (2003) examined the impact of terrorism on different industries’ stock prices and for this purpose
thirteen events are used in this study, the data of all events are taken from the period of October 2001 to
November 2002. Market model approach, event study and multiple regression analysis are used in this
research. In this study different industries and their stock’s prices are used as dependent variables and
different terrorist events are used as independent variables. Results explored that stock prices reacted
negatively to most events. It is found that those industries which have been taken in this study, analysis of the
same have negative impact on their stock price.
Maillet and Michel (2002) examined the impact of world trade center attack on financial markets and the data
are taken from October 1987 to 1929. In this study the indicator is index of market shocks. Indexes are taken
as dependent variable and 9/11 shock is taken as independent variable. Results explored that this attack of
9/11 had an impact on stock market. It is suggested that the strength of indicator which is IMS should allow for
natural extensions either as risk scale on single or portfolio stocks.
3. Methodology
In this study quantitative approach are used. This research technique is most commonly used in social
sciences. The purpose of this research is explanatory and this research is done to explain the reaction of stock
market’s prices to different terrorist events. This research explains the reasons in detail and clears the
ambiguous problems. Co relational research design is used to see the relationship between variables.
Secondary, time series data are used from the period of 2004 to 2010 of KSE-30 index and Regression analysis
is used to see the impact of independent variable on dependent variable. Terrorism is taken as independent
variable and stock market returns are taken as dependent variable.
Model
Log (SR) = a0 + a1AS1 + a2BM2 + a3HT3 + a4IA4+ t
Log (SR) = a0 + a1TE + t
Whereas; SR represent stock return of 30 companies individually that have been taken from Karachi-30 index,
a0 is Constant, AS is assassination, BM is bombing, HT is hostage taking, IA is infrastructure attacks and I is
Error term. In equation 2: TE represents all four activities. These are combined to see the combined impact of
terrorism.
4. Data Analysis
This chapter will explore the study of data. This study is done to see the combined impact of four terrorist
activities on Karachi stock exchange returns. The most affected firm is being placed on top and the least
affected is placed in the last.
4.1. Results and Estimations:
As it has been explained that regression model has been used in this study on each company to accurately see
the combined impact of independent variable (terrorism) on dependent variable that is companies’ stock
market returns. Test of regression is mentioned in table 4.1.
Insert Table 4.1 Here
Adjusted R- square shows the change in returns and in table 4.1 the results of the tests are provided. As it is
seen maximum value of R square is .2572 for DG khan cement and the least value is -0.0018 for Fauji fertilizers.
Insert table 4.2
F and Sig is the F-statistic and the probability connected with it. If the probability value of F is less than 0.05
then terrorism is good predictor of stock prices returns. Same as if the value of P is greater than 0.05 means
terrorism is not good predictor of stock market returns. The F-statistic in the model of Unilever is 122.0227
having significant p-value 0.000 which shows that terrorism is good predictor of stock returns. All the
companies represent the p-value 0.00 which shows the significance of independent variable. Only hub power
and FFBQ show that the terrorism is not good predictor for stock price returns.
Insert Table 4.3 Here
The constant value referred as Y intercept, and the value of Y intercept for Uniliver is 770.6291 which describes
the evaluation of regression line when it touches the Y axis. It is the forecasted value of stock returns when no
Universal Journal of Management and Social Sciences Vol. 2, No.8; August 2012
78
terror activity exists. The coefficient of terrorism for Uniliver is -34.27539 which shows every unit increase in
terrorism cause to decrease 34.27539 units in stock returns, while all other variables are constant. Cofficient of
nestle shows -15.988 increase in terrorism cause to decrease in 15.988 units in stock return. The most affected
firm with terrorism is uniliver and the least affected firm is lotte because its cofficient is -0.003 which means
increase in every unit in terrorism cause to decrease 0.003 unit in its stock return.
Granger Causality Analysis:
By applying the granger (1969) causality analysis the direction of causality is checked between independent
and dependent variable. In order to determine the causality analysis we used different lag values. Eldor
(2004) also used lag values in granger causality test.
Insert Table 4.4 Here
Granger causality results show bidirectional relation between independent variable (terrorism) and dependent
variable (stock returns). Results of granger causality placed in table 4.4.
5. Conclusion and Recommendations
5.1 Conclusion
This study examine the impact of terrorism on stock returns and t o find out the combined effect of terrorist
activities on stock returns, four variables are selected, bombing, armed isolation, assassination and hostage
taking. Data have been taken from KSE -30index (Karachi Stock Exchange). To make this effort successful, time
series, monthly data of these 30 companies have been gathered covering period from 2004 to 2010.
Regression analysis and granger causality have been applied to analyze the impact of terrorism on stock
returns of listed companies with KSE-30 index. We found stock return reacts negatively to terrorist activities
but variation insignificance do exist in literature. The results of this research support the prior studies.
5.2. Recommendation:
During the study we analyzed the way by which companies can enhance their returns. Due to unambiguous
situation every activity of terrorism cannot be predicted.
Companies should concentrate on the analysis of terrorism.
Companies should hire people to closely work and analyze on federal, local and business level. Once
companies are aware with their structured and unstructured situations then they can take better
steps to save companies’ returns and can make better policies.
In order to save the companies from losses, precautionary step reports on cost reducing techniques
should be provided which will not only benefit the firms but in case of any unambiguous situation the
returns will support the firms operation. At local level there are many departments and individuals
who provide information regarding potential terrorism.
Policies should be formed to deal with anti terrorism.
There are only four variables, which have been taken to see the combined impact of terrorism on
stock returns, more variables can be taken to analyze the combined impact of terrorism on stock
returns.
The data are taken from KSE-30 index which represent the results of thirty firms, more recent and
wide range of data would be beneficial for more accurate results. Comparison can be done between
different countries.
References
Ahmed, I., Nawaz1, M. M., & Qazi, T. F. ( 2011 , July). Impact Of Terrorism On Tourism Industry: A
Point To Ponder. International Journal Of Academic Research , P. Part I Vol. 3. No. 4.
Brown, J. R., Cummins, J. D., Lewis, C. M., & Wei, R. ( 2003, November 4). An Empirical Analysis Of The
Economic Impact Of Federal Terrorism Reinsurance. Financial Institution Center , Pp. 19104-6218.
Brück, T., & Wickström, B. A. ( 2004, April). The Economic Consequences Of Terror: A Brief Survey.
Households In Conflict Network , P. Working Paper 03.
Christofis, N., Kollias, ,. C., Papadamou, S., & Stagiannis, A. ( 2010, April). Terrorism And Capital
Markets: The Effects Of The Istanbul Bombings. Economics Of Security Working Paper 31 .
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Eldor, R., & Melnick, R. (2004, April 20). Financial Markets And Terrorism. European Journal Of
Political Economy , Pp. 367–386.
Gheno, A., & Lee, S. L. (2006, November). The Impact Of 9/11 On Us Reit Returnes: Fundamentals And
Financial. International Journal Of Strategic Management , Pp. 209-216.
Gul, T., Hussain, A., Bangash, S., & Khattak, S. W. (2010). Impact Of Terrorism On The Financial
Markets Of Pakistan. European Journal Of Social Sciences – Volume 18, Number 1 .
Gulley, O. D., & Sultan, J. (2006, November ). Risk Premium, Volatility, And Terrorism: New Evidence.
Haque, M. ( 2009, March). Impact Of September 11, 2001 (9/11) In The Emerging Market’s Stock
Volatility. Research Buzz Volume 5, Issue 3 .
Johnston, R. B., & Nedelescu, O. M. ( 2005, March). The Impact Of Terrorism On Financial Markets.
International Monetary Fund , P. Imf Working Paper/05/60.
Maillet, B., & Michel, T. ( 2002, January). How Deep Was The September Stock Exchange Crisis?
Putting Last Events Into Perspective On The American And French Stock Markets With An Index Of Market
Shocks. Pp. Jel Classification: G.10, G.14.
Nguyen, A. P., & Enomoto, C. E. ( 2009, December). Acts Of Terrorism And Their Impacts .
International Business & Economics Research Journal On Stock Index Returns And Volatility: The Cases Of The
Karachi And Tehran Stock Exchanges , Pp. Volume 8, Number 12.
Straetmans, S. T., Verschoorb, W. F., & Wolff, C. C. ( (2008)). Extreme Us Stock Market Fluctuations In The
Wake Of 9/11. Journal Of Applied Econometrics , Pp. J. Appl. Econ. 23: 17–42.
Appendix
Table 4.1:
Name of Companies Adj R-Square
D.G. Khan Cement Co. Limited 0.257273
PTCL 0.239139
Pakistan State Oil Co. Limited. 0.187818
Fauji Fertilizer Company 0.186464
Millat Tractors limited. 0.184218
National Refinery limited. 0.179782
Unilever Pakistan 0.178757
Bank Alfalah Limited 0.174062
Pakistan Oil fields limited. 0.170464
Engro Corporation (Pak) imited 0.168556
Dawood Hercules Corp. 0.167751
I.C.I Pakistan limited. 0.162171
Nestle Pakistan limited. 0.157101
Pak Petroleum limited. 0.153
Oil & Gas Dev. Co 0.151351
MCB Bank Limited 0.131885
Attock Petroleum limited 0.131548
Attock Refinery limited. 0.115253
Adamjee Insurance Co. limited. 0.163642
United Bank limited. 0.076141
Nishat Mills limited 0.07578
National Bank Of Pakistan 0.060527
Lotte Pak PTA limited. 0.052967
Universal Journal of Management and Social Sciences Vol. 2, No.8; August 2012
80
Habib bank limited 0.050094
Arif Habib Corporation 0.043437
Lucky Cement Limited 0.04016
Kot Addu Power 0.027985
Bank AL–Habib Limited 0.005839
Hub Power Company Limited 0.002618
Fauji Fertilizer Bin Qasim -0.0018
Table 4.2:
Name of Companies F-statistic (Prob)
D.G. Khan Cement Co. Limited 27.32557 (0.000)
PTCL 23.62959(0.0000)
Pakistan State Oil Co. Limited. 129.5759 (0.000)
Fauji Fertilizer Company 128.6651 (0.000)
Millat Tractors limited. 126.555 (0.000)
National Refinery limited. 122.8683 (0.000)
Unilever Pakistan 122.0227 (0.000)
Bank Alfalah Limited 16.1736 (0.000142)
Pakistan Oil fields limited. 114.8433 (0.000)
Engro Corporation (Pak) imited 113.7158 (0.000)
Dawood Hercules Corp. 113.0691 (0.000)
I.C.I Pakistan limited. 108.62 (0.000)
Nestle Pakistan limited. 104.6284 (0.000)
Pak Petroleum limited. 101.4347 (0.000)
Oil & Gas Dev. Co 100.1588 (0.000)
MCB Bank Limited 85.4683 (0.000)
Attock Petroleum limited 85.21994 (0.000)
Attock Refinery limited. 73.42852 (0.000)
Adamjee Insurance Co. limited. 4.717552 (0.04346)
United Bank limited. 46.82348 (0.000)
Nishat Mills limited 7.231680 ( 0.00882)
National Bank Of Pakistan 5.896402(0.0175)
Lotte Pak PTA limited. 5.586208 (0.000)
Habib bank limited 30.32081 (0.000)
Arif Habib Corporation 26.24764 (0.000)
Lucky Cement Limited 4.18017 (0.0444)
Kot Addu Power 17.00746 (0.00004)
Bank AL–Habib Limited 4.265522 (0.039357)
Hub Power Company Limited 2.459563 (0.117381)
Fauji Fertilizer Bin Qasim 0.001097 (0.973586)
Universal Journal of Management and Social Sciences Vol. 2, No.8; August 2012
81
Table 4.3:
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -34.27539 -11.0464 0.0000 0.178757 122.0227 (0.000)
C 770.6291 15.16453 0.0000
UnileverPakistan
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -33.4307 -5.22739 0.0000 0.257273 27.32557 (0.000)
C 108.7908 9.548736 0.0000
D.G. Khan Cement Co. Limited
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -24.71333 -2.42825 0.0176 0.060527 5.896402(0.0175)
C 113.1012 6.237985 0.0000
National Bank Of Pakistan
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -18.19157 -2.04455 0.0444 0.04016 4.18017 (0.0444)
C 100.6853 6.35196 0.0000
Lucky Cement Limited
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -4.040242 -11.3831 0.0000 0.187818 129.5759 (0.000)
C 111.7128 19.21778 0.0000
Pakistan State Oil Co. Limited.
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -15.98825 -10.2288 0.0000 0.157101 104.6284 (0.000)
C 371.9345 14.52901 0.0000
NestlePakistanlimited.
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -13.70111 -2.17199 0.0435 0.163642 4.717552 (0.04346)
C 66.41864 6.266639 0.0000
Adamjee Insurance Co. limited.
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -13.51207 -4.02164 0.0001 0.174062 16.1736 (0.000142)
C 47.87715 8.000592 0
Bank Alfalah Limited
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -9.449484 -2.68918 0.0088 0.07578 7.231680 ( 0.00882)
C 67.66873 10.80972 0.0000
Nishat Mills limited
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -6.304431 -4.86103 0.0000 0.239139 23.62959(0.0000)
C 17.1372 7.499687 0.0000
PTCL
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -4.440713 -11.2497 0.0000 0.184218 126.555 (0.000)
C 120.5332 18.64401 0.0000
Millat Tractors limited.
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Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -3.798698 -9.23147 0.0000 0.131548 85.21994 (0.000)
C 106.5401 15.80865 0.0000
Attock Petroleum limited
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -3.247921 -10.6334 0.0000 0.167751 113.0691 (0.000)
C 94.36804 18.86414 0.0000
Dawood Hercules Corp.
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -3.084293 -11.0846 0.0000 0.179782 122.8683 (0.000)
C 90.84395 19.93453 0.0000
National Refinery limited.
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -2.32692 -10.7165 0.0000 0.170464 114.8433 (0.000)
C 74.4764 20.90572 0.0000
Pakistan Oil fields limited.
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -1.963552 -9.24491 0.0000 0.131885 85.4683 (0.000)
C 66.60051 19.14623 0.0000
MCBBankLimited
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -1.67268 -10.6638 0.0000 0.168556 113.7158 (0.000)
C 60.20601 23.30685 0.0000
Engro Corporation (Pak) Limited
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -1.427129 -10.0715 0.0000 0.153 101.4347 (0.000)
C 54.95045 23.6781 0.0000
PakPetroleumlimited.
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -1.152523 -8.56904 0.0000 0.115253 73.42852 (0.000)
C 48.9541 22.22375 0.0000
Attock Refinery limited.
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -1.101806 -10.0079 0.0000 0.151351 100.1588 (0.000)
C 47.83833 26.53144 0.0000
Oil&GasDev.Co
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -0.938752 -11.3431 0.0000 0.186464 128.6651 (0.000)
C 29.66222 21.90346 0.0000
Fauji Fertilizer Company
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -0.771686 -5.50643 0.0000 0.050094 30.32081 (0.000)
C 40.71386 17.73854 0.0000
Habib bank limited
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Table 4.4:
No Name of Company Null Hypothesis F-statistic Probability
1 Bank Alfalah Limited TERRORISM does not Granger Cause RETURN 0.68737 0.4102
RETURN does not Granger Cause TERRORISM 3.61961 0.0617
2 D.G. Khan Cement Co. Limited TERRORISM does not Granger Cause RETURN 3.75253 0.0564
RETURN does not Granger Cause TERRORISM 6.77097 0.0111
3 National Bank Of Pakistan TERRORISM does not Granger Cause RETURN 0.3761 0.9291
RETURN does not Granger Cause TERRORISM 1.83468 0.0888
4
Engro Corporation (Pak)
Limited TERRORISM does not Granger Cause RETURN 0.00814 0.9283
RETURN does not Granger Cause TERRORISM 6.68678 0.0116
5 Nishat Mills limited. TERRORISM does not Granger Cause RETURN 3.21428 0.0776
RETURN does not Granger Cause TERRORISM 1.81926 0.182
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -0.704469 -6.84277 0.0000 0.076141 46.82348 (0.000)
C 39.1285 23.20645 0.0000
UnitedBanklimited.
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -0.434268 -5.12325 0.0000 0.043437 26.24764 (0.000)
C 33.20591 23.78749 0.0000
ArifHabibCorporation
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -0.260134 -4.28642 0.0000 -0.001803 0.001097 (0.973586)
C 24.98411 22.31518 0.0000
Fauji Fertilizer Bin Qasim
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -0.233742 -4.12401 0.0000 0.027985 17.00746 (0.00004)
C 28.93827 31.17463 0.0000
Kot Addu Power
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -0.105493 -2.06531 0.0394 0.005839 4.265522 (0.039357)
C 26.14339 31.25137 0.0000
Bank AL–Habib Limited
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -0.078788 -1.5683 0.1174 0.002618 2.459563 (0.117381)
C 25.56895 31.07614 0.0000
HubPowerCompanyLimited
Variable Coefficient t-Statistic Prob. Adj R-square Prob(F-statistic)
TERRORISM -0.003 -2.094 0.039 0.052967 5.586208 (0.000)
C 8.798 11.269 0.0000
Lotte Pak PTA limited.
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6 Lucky Cement Limited TERRORISM does not Granger Cause RETURN 8.62871 0.0046
RETURN does not Granger Cause TERRORISM 0.35763 0.5519
7 PTCL TERRORISM does not Granger Cause RETURN 0.0097 0.9219
RETURN does not Granger Cause TERRORISM 5.20028 0.0258
8 Arif Habib Corporation TERRORISM does not Granger Cause RETURN 5.73554 0.0195
RETURN does not Granger Cause TERRORISM 0.16687 0.6842
9 Fauji Fertilizer Company TERRORISM does not Granger Cause RETURN 0.47174 0.7029
RETURN does not Granger Cause TERRORISM 3.53796 0.019
10 Lotte Pak PTA limited. TERRORISM does not Granger Cause RETURN 2.85174 0.0223
RETURN does not Granger Cause TERRORISM 0.60634 0.6953
11 Fauji Fertilizer Bin Qasim TERRORISM does not Granger Cause RETURN 1.4516 0.2354
RETURN does not Granger Cause TERRORISM 3.94973 0.0117
12 Pakistan Oil fields limited. TERRORISM does not Granger Cause RETURN 3.39754 0.0038
RETURN does not Granger Cause TERRORISM 0.85536 0.61
13
Adamjee Insurance Co.
limited. TER does not Granger Cause RETURN 5.27253 0.0405
RETURN does not Granger Cause TER 2.82314 0.1187
14 Attock Refinery limited. TERRORISM does not Granger Cause RETURN 7.08669 0.0097
RETURN does not Granger Cause TERRORISM 0.93701 0.3366
15 MCB Limited TERRORISM does not Granger Cause RETURN 4.30443 0.0419
RETURN does not Granger Cause TERRORISM 0.69464 0.4076
16 Pak Petroleum limited. TERRORISM does not Granger Cause RETURN 0.48414 0.489
RETURN does not Granger Cause TERRORISM 3.61283 0.0617
17 Oil & Gas Dev. Co TERRORISM does not Granger Cause RETURN 0.20573 0.6514
RETURN does not Granger Cause TERRORISM 3.01294 0.0865
18 Hub Power Company Limited TERRORISM does not Granger Cause RETURN 0.01026 0.9196
RETURN does not Granger Cause TERRORISM 3.39473 0.0693
19 United Bank limited. TERRORISM does not Granger Cause RETURN 6.67536 0.012
RETURN does not Granger Cause TERRORISM 0.04514 0.8324
20 Habib bank limited TERRORISM does not Granger Cause RETURN 3.22792 0.077
RETURN does not Granger Cause TERRORISM 1.92103 0.1704
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21 Pakistan State Oil Co. Limited. TERRORISM does not Granger Cause RETURN 12.2202 0.0127
RETURN does not Granger Cause TERRORISM 3.91569 0.0963
22 Bank AL–Habib Limited TERRORISM does not Granger Cause RETURN 0.67015 0.8108
RETURN does not Granger Cause TERRORISM 1.89535 0.0967
23 Attock Petroleum limited TERRORISM does not Granger Cause RETURN 10.2586 0.0021
RETURN does not Granger Cause TERRORISM 0.52622 0.4708
24 Dawood Hercules Corp. TERRORISM does not Granger Cause RETURN 7.51887 0.0079
RETURN does not Granger Cause TERRORISM 0.36903 0.5456
25 National Refinery limited. TERRORISM does not Granger Cause RETURN 5.64963 0.0204
RETURN does not Granger Cause TERRORISM 2.35581 0.1296
26 Kot Addu Power TERRORISM does not Granger Cause RETURN 0.72223 0.6709
RETURN does not Granger Cause TERRORISM 1.83638 0.095
27 I.C.I Pakistan limited. TERRORISM does not Granger Cause RETURN 4.11156 0.0461
RETURN does not Granger Cause TERRORISM 1.44878 0.2325
28 Millat Tractors limited. TERRORISM does not Granger Cause RETURN 3.52E+00 0.0642
RETURN does not Granger Cause TERRORISM 4.17223 0.0444
29 Unilever Pakistan TERRORISM does not Granger Cause RETURN 1.40747 0.2397
RETURN does not Granger Cause TERRORISM 3.18649 0.0788
30 Nestle Pakistan limited. TERRORISM does not Granger Cause RETURN 0.91008 0.4638
RETURN does not Granger Cause TERRORISM 2.4597 0.0546