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

*[email protected]

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)


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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


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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.


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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.


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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.


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


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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.


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

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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.

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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


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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)


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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


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


TERRORISM -24.71333 -2.42825 0.0176 0.060527 5.896402(0.0175)

C 113.1012 6.237985 0.0000

National Bank Of Pakistan


TERRORISM -18.19157 -2.04455 0.0444 0.04016 4.18017 (0.0444)

C 100.6853 6.35196 0.0000

Lucky Cement Limited


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.


TERRORISM -15.98825 -10.2288 0.0000 0.157101 104.6284 (0.000)

C 371.9345 14.52901 0.0000

NestlePakistanlimited.


TERRORISM -13.70111 -2.17199 0.0435 0.163642 4.717552 (0.04346)

C 66.41864 6.266639 0.0000

Adamjee Insurance Co. limited.


TERRORISM -13.51207 -4.02164 0.0001 0.174062 16.1736 (0.000142)

C 47.87715 8.000592 0

Bank Alfalah Limited


TERRORISM -9.449484 -2.68918 0.0088 0.07578 7.231680 ( 0.00882)

C 67.66873 10.80972 0.0000

Nishat Mills limited


TERRORISM -6.304431 -4.86103 0.0000 0.239139 23.62959(0.0000)

C 17.1372 7.499687 0.0000

PTCL


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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TERRORISM -3.798698 -9.23147 0.0000 0.131548 85.21994 (0.000)

C 106.5401 15.80865 0.0000

Attock Petroleum limited


TERRORISM -3.247921 -10.6334 0.0000 0.167751 113.0691 (0.000)

C 94.36804 18.86414 0.0000

Dawood Hercules Corp.


TERRORISM -3.084293 -11.0846 0.0000 0.179782 122.8683 (0.000)

C 90.84395 19.93453 0.0000

National Refinery limited.


TERRORISM -2.32692 -10.7165 0.0000 0.170464 114.8433 (0.000)

C 74.4764 20.90572 0.0000

Pakistan Oil fields limited.


TERRORISM -1.963552 -9.24491 0.0000 0.131885 85.4683 (0.000)

C 66.60051 19.14623 0.0000

MCBBankLimited


TERRORISM -1.67268 -10.6638 0.0000 0.168556 113.7158 (0.000)

C 60.20601 23.30685 0.0000

Engro Corporation (Pak) Limited


TERRORISM -1.427129 -10.0715 0.0000 0.153 101.4347 (0.000)

C 54.95045 23.6781 0.0000

PakPetroleumlimited.


TERRORISM -1.152523 -8.56904 0.0000 0.115253 73.42852 (0.000)

C 48.9541 22.22375 0.0000

Attock Refinery limited.


TERRORISM -1.101806 -10.0079 0.0000 0.151351 100.1588 (0.000)

C 47.83833 26.53144 0.0000

Oil&GasDev.Co


TERRORISM -0.938752 -11.3431 0.0000 0.186464 128.6651 (0.000)

C 29.66222 21.90346 0.0000

Fauji Fertilizer Company


TERRORISM -0.771686 -5.50643 0.0000 0.050094 30.32081 (0.000)

C 40.71386 17.73854 0.0000

Habib bank limited


83

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


3 National Bank Of Pakistan TERRORISM does not Granger Cause RETURN 0.3761 0.9291


4

Engro Corporation (Pak)

Limited TERRORISM does not Granger Cause RETURN 0.00814 0.9283


5 Nishat Mills limited. TERRORISM does not Granger Cause RETURN 3.21428 0.0776



TERRORISM -0.704469 -6.84277 0.0000 0.076141 46.82348 (0.000)

C 39.1285 23.20645 0.0000

UnitedBanklimited.


TERRORISM -0.434268 -5.12325 0.0000 0.043437 26.24764 (0.000)

C 33.20591 23.78749 0.0000

ArifHabibCorporation


TERRORISM -0.260134 -4.28642 0.0000 -0.001803 0.001097 (0.973586)

C 24.98411 22.31518 0.0000

Fauji Fertilizer Bin Qasim


TERRORISM -0.233742 -4.12401 0.0000 0.027985 17.00746 (0.00004)

C 28.93827 31.17463 0.0000

Kot Addu Power


TERRORISM -0.105493 -2.06531 0.0394 0.005839 4.265522 (0.039357)

C 26.14339 31.25137 0.0000

Bank AL–Habib Limited


TERRORISM -0.078788 -1.5683 0.1174 0.002618 2.459563 (0.117381)

C 25.56895 31.07614 0.0000

HubPowerCompanyLimited


TERRORISM -0.003 -2.094 0.039 0.052967 5.586208 (0.000)

C 8.798 11.269 0.0000

Lotte Pak PTA limited.


84

6 Lucky Cement Limited TERRORISM does not Granger Cause RETURN 8.62871 0.0046


7 PTCL TERRORISM does not Granger Cause RETURN 0.0097 0.9219


8 Arif Habib Corporation TERRORISM does not Granger Cause RETURN 5.73554 0.0195


9 Fauji Fertilizer Company TERRORISM does not Granger Cause RETURN 0.47174 0.7029


10 Lotte Pak PTA limited. TERRORISM does not Granger Cause RETURN 2.85174 0.0223


11 Fauji Fertilizer Bin Qasim TERRORISM does not Granger Cause RETURN 1.4516 0.2354


12 Pakistan Oil fields limited. TERRORISM does not Granger Cause RETURN 3.39754 0.0038


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


15 MCB Limited TERRORISM does not Granger Cause RETURN 4.30443 0.0419


16 Pak Petroleum limited. TERRORISM does not Granger Cause RETURN 0.48414 0.489


17 Oil & Gas Dev. Co TERRORISM does not Granger Cause RETURN 0.20573 0.6514


18 Hub Power Company Limited TERRORISM does not Granger Cause RETURN 0.01026 0.9196


19 United Bank limited. TERRORISM does not Granger Cause RETURN 6.67536 0.012


20 Habib bank limited TERRORISM does not Granger Cause RETURN 3.22792 0.077



85

21 Pakistan State Oil Co. Limited. TERRORISM does not Granger Cause RETURN 12.2202 0.0127


22 Bank AL–Habib Limited TERRORISM does not Granger Cause RETURN 0.67015 0.8108


23 Attock Petroleum limited TERRORISM does not Granger Cause RETURN 10.2586 0.0021


24 Dawood Hercules Corp. TERRORISM does not Granger Cause RETURN 7.51887 0.0079


25 National Refinery limited. TERRORISM does not Granger Cause RETURN 5.64963 0.0204


26 Kot Addu Power TERRORISM does not Granger Cause RETURN 0.72223 0.6709


27 I.C.I Pakistan limited. TERRORISM does not Granger Cause RETURN 4.11156 0.0461


28 Millat Tractors limited. TERRORISM does not Granger Cause RETURN 3.52E+00 0.0642


29 Unilever Pakistan TERRORISM does not Granger Cause RETURN 1.40747 0.2397


30 Nestle Pakistan limited. TERRORISM does not Granger Cause RETURN 0.91008 0.4638


impact of terrorism on stock return

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