ECONOMIC AND POLITICAL UNCERTAINTY AND STOCK MARKET VOLATILITY IN PAKISTAN: A DYNAMIC STUDY
Keywords:
Stock Market of Pakistan, Political turmoil, Crude Oil Price, Standard Gold Price, Macroeconomic Variables (Exchange Rate, Interest Rate, and Inflation), Dynamic Model, OLS MethodAbstract
The main aim of this research is to explain how Political and Economic uncertainty creates an impact on stock market volatility in Pakistan by using the political stability score as a proxy for evaluations. This study has one more important parameter, fluctuating
commodity prices (oil and gold prices are involved in the forecasting of the stock market. The KSE 100 index is used as a market index for stock market volatility for the period 2013-2023. The results of regression analysis and the GMM approach indicate that oil price, gold price, political instability, inflation, and interest rate are significant indicators of stock market volatility. Hence, this study concludes that such a combination of variables has a major impact. In the case of Pakistan, it can be perceived from the current political and
economic uncertainties that Pakistan will continue with the same declining flow. The condition of its financial markets would be really bad for investors. Firstly, there is a need for a good and stable governing system to attract investors to the country.
