Financial reforms and common stochastic trends in international stock prices: A case study of Pakistan

Authors

Mohammed Nishat, Institute of Business Administration, Karachi, Pakistan
Ch. Muhammad Irfan, Risk Analyst, Corporate and Institutional Research United Bank Limited, Karachi, Pakistan

Abstract

This study uses the co-integration and error-correction techniques to examine the linkages between Pakistan and other capital markets of developed economies (US, UK, Japan, Australia and Canada); regional markets in South Asia (India, Sri Lanka), East Asia (Indonesia, South Korea, Singapore, Malaysia, Taiwan, Philippines) and EU (Austria, Belgium, Denmark, Germany, Italy and Czech) countries. The results indicate a long-run relationship between Pakistani stock market and most of the international markets during the sample period (1997 to 2004). However, the longrun linkages were comparatively stronger with developed and EU markets. The direction of linkages in most cases, are from other regional markets to Pakistan. The data depicted a long-run relationship both in the initial period of reforms (1997-2000) and in the later period of reforms (2001-2004). However, a market group based analysis indicated that the South Asian markets indicated comparatively stronger long run relationship with Pakistan. JEL classification: G18, G15

Keywords

Reforms, International Financial Markets Integration

DOI

https://doi.org/10.54784/1990-6587.1116

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Recommended Citation

Nishat, M., & Irfan, C. M. (2007). Financial reforms and common stochastic trends in international stock prices: A case study of Pakistan. Business Review, 2(1), 117-138. Retrieved from https://doi.org/10.54784/1990-6587.1116