Stock market efficiency of pakistan stock exchange a review of literature from 1995 2018

Fiaz Ahmad, Center for Research and Development Minhaj University Lahore
fiaz.crd@mul.edu.pk
Chapter No. 1 Introduction:
Article 1: Volatility at Karachi Stock Exchange
requent "crashes" of the stock market reported during the year 1994 suggest that the
Karachi bourse is rapidly converting into a volatile market. This cannot view as a
positive sign for this developing market of South Asia. Though heavy fluctuations in
stock prices are not an unusual phenomena and it has been observed almost all big and small
exchanges of the world. Focusing on the reasons for such fluctuations is instructive and likely
to have important policy implications. Proponents of the efficient market hypothesis argue
that changes in stock prices mainly dependent on the arrival of information regarding the
expected returns the stock. However, Fama (1965), French (1980), and French and Rolls
(1986) observed that volatility is to some extent caused by trading itself. Portfolio insurance
schemes also have the potential to increase volatility. Brady Commission's provides useful
insights into the effect of portfolio insurance schemes. It is interesting to note that many
analysts consider the so-called "crashes" of Karachi stock market as a deliberate move to
bring down prices. An attempt is made in this study examine the effect of trading on the
volatility of stock prices at Karachi Exchange (KSE). Findings of the study will help
understand the mechanism of rise and fall of stock prices at the Karachi bourse (Farid &
Ashraf, 1995).
Article 2: Financial Market Reform in Pakistan
he paper argues that the finance dimension of economic development has often
been treated as an afterthought by researchers and politicians alike, because it is
considered to be too "sophisticated" to matter for "simple" economies. The role of
the financial sector was considered to be primarily for mobilizing resources to increase
growth. However, experience has also revealed that financial development, including stock
market development, is correlated with current and future economic growth, capital
accumulation, and productivity improvements. It is suggested that a strategy for financial
market development in emerging economies is better evolved from the perspective of the
"functions" of financial markets as envisaged in modern financial literature. It is also argued
that financial sector policies in emerging economies should focus on enhancing, rather than
inhibiting, the multiple roles of financial markets (Haque, n.d.).
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Article 3: An analysis of stock market efficiency: Developed vs Islamic stock markets
using MF-DFA
n efficient market has been theoretically proven to be a key component for
effective and efficient resource allocation in an economy. This paper incorporates
econophysics with Efficient Market Hypothesis to undertake a comparative
analysis of Islamic and developed countries’ markets by extending the understanding of their
multiracial nature. By applying the Multiracial Detrended Fluctuation Analysis (MFDFA) we
calculated the generalized Hurst exponents, multiracial scaling exponents and generalized
multiracial dimensions for 22 broad market indices. The findings provide a deeper
understanding of the markets in Islamic countries, where they have traces of highly efficient
performance particularly in crisis periods. A key finding is the empirical evidence of the
impact of the ‘stage of market development’ on the efficiency of the market. If Islamic
countries aim to improve the efficiency of resource allocation, an important area to address is
to focus, among others, on enhancing the stage of market development.(Rizvi, Dewandaru,
Bacha, & Masih, 2014).
Article 4: Impact of interest rate on stock Market; Evidence from Pakistani market
his research paper was an endeavor to make a model, to find out the connection
involving stock market and interest rate (Pakistani market) and to run certain tests
related to statistical analysis. These tests run with the help of month end closing
stock prices of Karachi Stock Exchange and interest rates of previous ten years i.e. Jan 2004
to Dec 2013. Correlation, Regression analysis and descriptive analysis were run to find out
the blow of interest rate on stock market of Pakistan. Performance of Pakistani Stock market
is highly dependent on political situation. The most important factor of any country’s
economy is its Stock market. But there are certain factors which have negative and positive
impact on stock markets. Here I am considering one factor that has impact these are inversely
related with each other i.e. one increases other decreases and vice versa (H. Ali, 2014).
Article 5: Impact of political events on stock market returns: empirical evidence from
Pakistan
urpose – The purpose of this paper is to investigate the relationship between
uncertain political events and Pakistani Stock Markets from May 1999 to December
2011. Design/methodology/approach – Using the mean-adjusted return model and
event study methodology and by comparing the market efficiency between the two
government style, i.e. autocratic and democratic, the authors determined that how uncertain
political events are affecting Pakistani Stock Markets. Findings – The empirical result shows
that political events have an impact on the Karachi Stock Exchange (KSE) returns. Moreover,
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the paper derives from the results that the KSE is inefficient for a short span of time, after 15
days KSE absorbs the noisy information. The political situation in Pakistan was more stable
in autocratic government structure than in democratic structure but it is difficult to state that
the stock markets are more efficient in Autocracy because only few events took place during
an autocratic regime and magnitude of events was not same in the autocratic and democratic
government structure. Originality/value – This study is unique in its nature as it examines the
effect of multiple political events on stock market returns in Pakistan simultaneously and is
expected to contribute significantly in the capital market literature of Pakistan in particular.
Keywords Pakistan, Event study, Karachi Stock Exchange, Mean-adjusted return model,
Political event, Stock market volatility Paper type Research paper (Sajid Nazir, Younus,
Kaleem, & Anwar, 2014).
Article 6: The causal relationship of interest rate and stock prices: empirical evidence
from Pakistani markets
his study is focusing on the relationship between stock returns of the Karachi Stock
Exchange (KSE) and the short term interest rates in Pakistan. The stock returns are
calculated from Karachi Stock Exchange 100 index, and monthly rates of six
monthly Tbills for the period of 1994 to 2014 are used for short term interest rates. . At first,
we find out the significant short term and long term relationships between stock returns and
the interest rates through the error correction mechanism and co-integration test. Then
Granger Casualty test is used to test that either the stock prices cause the interest rates or the
interest rates cause the stock returns. Thus we find no significant relation between these two
variables in either direction. So interest rate is not a Granger cause of stock returns and stock
returns are also not a Granger cause of interest rates in Pakistan.(Hussain, Zaman, & Baloch,
2014)
Article 7: Long Memory Behavior in the Returns of Pakistan Stock Market: ARFIMA-
FIGARCH Models
his study examines the weak-form market efficiency of Pakistan Stock Market
namely
Karachi Stock Exchange for the period 2010-2013. The efficiency of stock market
has tested by using ARFIMA-FIGARCH models estimated under different distribution
assumptions as Normal, Student-t, Skewed Student- t and GED distribution. According to
findings of study, ARFIMA model do not support long memory behavior for the stock market
returns. However, FIGARCH model indicate that volatility of market returns has long
memory. Moreover, in order to test the feature of long memory in the return and volatility of
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the stock market simultaneously, ARFIMA-FIGARCH models are estimated according to
different distributions simultaneously. Predictable structure of volatility of Pakistan Stock
Market display that this market is the weak-form market inefficiency. Consequently, it is
possible to say that technical analysis related to this stock market may be valid. This implies
that it is possible to predict future stock prices and extra ordinary gains could be obtained
trading in this market. (Turkyilmaz & Balibey, 2014).
Article 8: Presence of day-of-the-week effect in the Karachi stock market
his study investigates the day-of-the week (DOW) effect and volatility in Karachi
Stock Exchange (KSE), from 2009-2013, using all four indices in the exchange.
The objective is to assess the reliability of the four indices working at KSE, from
investor perspective of portfolio and risk management of KSE. By using OLS and
autoregressive technique with lagged value of returns the study shows Tuesday and Thursday
effect in case of KSE-100 and KSE-all share respectively. No DOW effect in KSE-30 and in
KMI-30 indices found. This is in favour of the free-floating concept of shares in these
indices. The GARCH (1,1) technique with student’s t distribution revealed highly persistent
volatility in KSE-100 index, comparatively less persistent shocks in KSEall share and KSE-
30 index and a rapid decay in KMI-30 (Shamshir & Mustafa, 2014).
Article 9: Islamic calendar events and stock market reaction: Evidence from Pakistan
his study investigates stock market anomaly in Pakistani stock market using its
major stock index i.e. Karachi Stock Exchange 100-Index (KSE-100 Index).
Previous literature of calendar anomalies mostly based on the Gregorian calendar
such as weekend effect, month effect, time of the month effect and holidays effect. However,
Islamic calendar anomalies are rarely investigated in the literature of finance. To explore this
issue, this study has examined the impact of five Islamic calendar events namely Ramadhan,
Eid-ul-Fitr, Eid-ul-Adha, Ashora, and Eid Miladun Nabi on Pakistani stock market index
returns using daily data of KSE-100 Index for the period of 2001 to 2012. Ordinary least
square (OLS) is used to investigate the Islamic calendar month effect while event
methodology is used to explore the significant abnormal return in the period of the Islamic
calendar events. Data are obtained from yahoo finance and KSE website. ADF-test is used to
check the stationary of data. As Islamic calendar events’ dates moves over time with respect
to Gregorian calendar, so dates of these selected Islamic calendar events are confirmed by
daily newspapers. Result of the study reveals that the Islamic events have a significant impact
on the stock return in studied period except the event of Eid ul Azha. There are observed
significant abnormal returns in pre-period event window of Ramadan, Ashora, Rabiul Awal
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and Eidul Fitar. And the post event window for Ramadan and Eidul Fitar has significant
abnormal returns. On the basis of these results we conclude that Islamic calendar anomaly
exist in Pakistani stock market. The results exhibits that Muharram and Ramadan have a
significant positive effect on KSE-100 Index’s returns.(Majeed, Raheman, Sohail, Bhatti, &
Zulfiqar, 2015).
Article 10: Day of the Week Anomaly and Market Efficiency: Evidence from KSE-
Pakistan
his paper investigates the Day of the Week Effect in the Pakistan stock market over
the recent period from 1997- 2014. Data has been analyzed in the light of EMH
theory. The salient feature of the theory is that still this theory has much supporter
than any other theory has in finance. The findings reveal that these anomalies appeared and
then disappeared from the Karachi stock market as priced by the arbitrageurs. The
disappearance and reappearance of calendar anomalies have practical implication for the
trading behavior of investors.(Raza, Shah, & Malik, 2015).
Article 11: Macroeconomic Factors and the Pakistani Equity Market: A Relationship
Analysis
he paper examines the relationship among stock market returns (KSE-100 Index)
and exchange rate, real interest rate, gross domestic product, money supply (M1). In
order to respond the queries, this study used monthly data of all variables from
2003 to 2013. And the applied tools of analysis are descriptive statistics, unit root test
(Phillips-Perron Test) and ARDL approach to co-integration. ARDL approach results
revealed that exchange rate, money supply, and real interest rate have no statistically
significant impact on stock market returns. However, there is a significant positive impact of
current GDP on stock market return and a significant negative impact of lag term of GDP on
stock market return. In the short-run, there is a significant positive impact of gross domestic
product on stock market return. The positive impact of GDP on stock market return is
consistent with some previous studies. This study concludes that GDP is the most important
factor among the selected macroeconomic variables to influence the Karachi Stock Exchange
returns (KSE 100 Index). The gross domestic product should be in focus in order to increase
shares’ value of Pakistani firms. The study helps investor in taking appropriate investment
decisions by assessing the movement of GDP and consequently the movement of stock
market returns. This study also helps to understand the behavior of stock market returns on
the arrival of new information and potential business performance (Ismail, Pervaz, Ahmed, &
Iqbal, 2016).
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Article 12: Predictors of Investor Overconfidence in Karachi Stock Exchange
ver the decades financial market researchers come up with resounding evidence
about the influence of investors’ behavior on investment decision making. In
pursuit to be counted as pure science, economists and conventional finance
researchers ignored possible effect of behavioral aspects on investment decision making.
They assumed investors as rational and thus financial markets as perfect. But this line of
thinking was unable to explain the events unfolded in financial markets over 1980s-2000s.
During the period behavioral economics and finance got importance and acceptance around
the world. The field of behavioral finance is fairly new in Pakistan therefore this study aims
at analyzing the possible predictors of investor overconfidence. Using data from a sample of
229 investors, strong support is found for the model. All of the findings either support the
findings of historical studies or in accordance with the basic theories in the area of behavioral
finance (Gul & Akhtar, 2016)
Article 13: Market Efficiency, Time-Varying Volatility and Equity Returns in the
Dhaka Stock Exchange
his paper examines the stock prices in the Dhaka Stock Exchange (DSE) in order to
test the efficient market hypothesis in pricing securities and the relationship
between stock returns and conditional volatility using best known daily price
indices DGEN ranging from January 2004 to April 2013. The findings are that the stocks in
DSE follow a random walk which suggests that the market meets the criterion of weak form
efficiency. The ARIMA confirms the random walk hypothesis. The results of GARCH (p, q)
model indicates the tendency for returns to exhibit volatility clustering; and a significant
positive link between risk and returns for DGEN index. Thus, it can be inferred that the mean
variance hypothesis holds for DSE as the evidence is found that investors are rewarded for
taking increased risk for the securities of DSE. The implications of these results are that the
investors cannot earn excess returns in the long run by using the historical share prices as the
basis of making investment strategies.(Uddin, Islam, & Majumder, n.d.).
Article 14: A study of Exchange rates movement and Stock Market volatility
n this paper we have analyzed the relationship between Indian rupess-USdollar
exchange rate and Nifty returns. This research is based on dynamic behavior between
stock markets movement and volatility of stock market for this purpose; we have
applied several statistical tests. .we have taken the data from period of October 2008, to
march, 2010.It study has proved that exchange rate and Nifty returns are non-normally
disturbed. Unit root tests have proved that Nifty returns and exchange rate are stationary and
they are stationary at level form. There is negative relationship between exchange rate and
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Nifty returns exchange rate. For testing the causal relationship between these variables we
have used Granger causality test.This test has shown that there is unidirectional relationship
between exchange rate and Nifty returns. This study is trying to attempt that stock market is
crucial for the economy. Different researchers have proved from their research that exchange
rate is the main determinates of business profitability. This study has provided such type of
information, which would favorable for the gaudiness of management decision about the risk
and investment. This information will beneficial for government policies. The maintained of
foreign exchange would motive the foreign investors.(Najaf & Najaf, 2016).
Article 15: Stock Market Volatility and Macroeconomic Factor Volatility
stock market, which is established well and huge capital is trading over here, is
providing a number of opportunities of saving and investing to its investors. The
main objective behind the establishment of stock market is to make an easy
process for savers and borrowers, as it takes savings from different groups and provide them
a stand to change these savings into successful investments. A stock market plays its key role
for the reallocation of funds in multiple sectors of an economy. It works as such a stand
where many variables collectively move together to make the economy of any country well
groomed. The macroeconomic factors have important concerns with stocks traded in the
stock market and these factors make investors to choose the stock because investors are
interested to know about the factors affecting the working of stock to manage their portfolios.
Abrupt variations and unusual movements of macroeconomic variables cause the stock
returns to fluctuate due to uncertainty of future gains (Ahmad & Ramzan, 2016).
Article 16: Testing Information Efficiency using Random Walk Model: Empirical
evidence from Karachi stock exchange
This study investigates the weak form of efficiency of Karachi stock exchange using daily,
weekly and monthly data for the period of June 2002 to June 2012. This study employs
different parametric and nonparametric tests for examining random walks i.e., Jarque-Bera
and Kolmogrov-Smirnov (KS) test for normality, autocorrelation and Run test for
autocorrelation, Augmented Dickey-Fuller (ADF) and Phillips- Perron (PP) for stationarity
and multiple variance ratio (MVR) tests. The results of this study indicate that by using all
approaches none of the returns (daily, weekly and monthly) are following random walk and it
is concluded that Pakistani stock market is not weak form efficient. The investors have an
opportunity to get benefit from the predictable behavior of this market (Fraz & Hassan,
2016).
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Article 17: Herding behavior in the Pakistan stock exchange: Some new insights
his study attempts to examine the presence of herding behavior in the
Pakistan Stock Exchange (PSX). The novel contribution of this paper is that it
investigates the herding phenomenon from a large number of facets such as herding
of firms towards market, herding of firms towards industry portfolios, herding of industry
portfolios towards market, herding in mostly traded stocks and in large and small stocks, and
herding in the crisis period. For this purpose, we use the herding behavior model of Christie
and Huang (1995) on the daily closing prices data of 609 firms listed on the PSX from
January 2004 to December 2013. Results show that individual firms do not herd towards
market index, except when the market experiences a negative return of 5%. However, when
we sort firms into small and large groups based on median market capitalization, results
indicate that large firms show herding behavior in extreme market movements. Further, we
find that firms in several industries herd towards their industry portfolios. However, we find
weak evidence of industry portfolios herding towards the market. We also segregate the
impact of financial crisis of 2008 from normal times. These findings support results of our
baseline estimation.(Shah, Shah, & Khan, 2017).
Article 18: Examining anomalies in Islamic equity market of Pakistan
he purpose of this study is to investigate the presence of anomalies named; January
effect, Islamic calendar effect, Day of the week effect, Time of the month effect,
Turn of the month effect and Half of the month effect in an Islamic equity market of
Pakistan. This study considered daily data from 30 September 2008 to 30th
June 2015. The
behavior of the data is tested by using the descriptive statistics method. The Generalized Auto
Regressive Conditional Heteroske dasticity Model (GARCH) model is applied to capture the
seasonality in returns and volatility in the Islamic Equity market. The results of this study
highlight certain interesting key findings. The notable findings indicate the Absence of
prominent January effect and the Ramadan effect. However, this study finds significant Day
of the week effect, Turn of the month effect, Time of the month effect and half of the month
effect in the Islamic index. This study suggests that investors would be able to gain abnormal
returns, if they would formulate their investment strategies accordingly to the seasonal return
patterns observed in this study (Jebran & Chen, 2017).
Article 19: Modeling the Stochastic Behavior of the Pakistan Stock Exchange. Journal
of Basic and Applied Sciences
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his research study examines the stochastic behavior of stock returns in the Pakistan
stock exchange (PSX) using the KSE 100 index daily return data from 2011 to
2016. Methodology is based on ARCH family of models such as ARCH, GARCH,
GARCH-M EGARCH, EGARCH-M and TARCH/GJR GARCH. These specifications have
been used to model the stochastic behavior of stock return in the Pakistan stock exchange.
The most appropriate model is selected on the basis of SIC and AIC selection criteria.
Diagnostic checking includes ARCH-LM test and Ljung-Box Q-Statistics. This research
study concludes that EGARCH (1, 1) specification explains the stochastic behavior of the
Pakistan stock exchange better than other models undertaken. The results of the study have
well-grounded policy implications for market regulators, policy makers and investors
(Hafeez, 2017).
Article 20: Socioeconomic stability and variability in stock market prices: A case study
of Karachi stock exchange.
he study attempted to identify the factors that responsible for variability in stock
market prices in Karachi Stock Exchange particularly focusing on socioeconomic
stability in the country. The socioeconomic stability is measured by an index
including social, economic and political dimensions of stability. Annual time series data for
the years 1973-2012 is utilized, and Phillips & Perron (PP) test is employed for stationary.
Autoregressive Conditional Heteroscedasticity and Generalized Conditional Heterosce
dasticity (ARCH/GARCH) technique are used for volatility in stock market prices. For the
structural breaks, Chow test is applied. Finally, the study utilized the Autoregressive
Distributed Lag (ARDL) approach to estimate the long-run and short-run dynamic
relationship. The results indicate that inflation, exchange rate, and foreign direct investment
positively influence the stock price volatility. Socioeconomic stability negatively affects the
volatility in stock market prices in both short-run and long-run. The country should improve
socioeconomic stability by attaining economic, social and political standards in the country
(R. Ali & Khan, 2018).
Article 21: Stock market efficiency: A comparative analysis of Islamic and conventional
stock markets
n this paper, we examine the comparative efficiency of 12 Islamic and conventional
stock markets counterparts using multiracial de-trended fluctuation analysis (MF-DFA).
The full sample results indicate that developed markets are relatively more efficient,
followed by the BRICS’ stock markets. The comparative efficiency analysis shows that
almost all the Islamic stock markets excluding Russia, Jordan and Pakistan are more efficient
sthan their conventional counterparts. Implying that Islamic stock markets are new, however
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the peculiar nature, shari’ah compliant laws and good governance and disclosure mechanisms
make them more efficient. Further, our results indicate that the Islamic stock markets’
adjustment to speculative activity is, in fact, higher than their conventional counterparts. The
findings of the study may help regulators and policy makers to reduce economic distortions
through more effective resource allocation.(S. Ali, Shahzad, Raza, & Al-Yahyaee, 2018).
Article 22: Effects of Corporate Governance on Organization’s Performance: Evidence
from Karachi Stock Exchange (30 Index)
orporate governance is one of the most important objectives of the firms because
they are based on the top level management performance of the firms. These are
related with the organization performance. The organization performance is
measured by the return on equity. The KSE is much authenticated source of the Pakistan. In
KSE the companies which are public listed companies are listed. We have done the work on
KSE 30-companies and the period is selected of 2004-2016. For this purpose, panel data
analysis has been performed. The organization performance is measured to know the
corporate governance. A conceptual frame work has been developed for this purpose and key
findings have been explained for the financial experts to make the future decisions. The
outcomes are showing that there is significant impact of all the independent variables which
are firm size, board meeting, non-executive directors and leverage on the dependent variable
which is ROE. So there is impact of corporate governance on organization performance.
From this information various types of people can get help. Like an investor who wanted to
invest in the companies which gives a maximum return, for them this provide a platform to
check the trends of the companies and can make a wise decision about investment. Not only
for the investor but also for the students which wanted to know about the firm performance
(Sultan, 2018).
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Reference:
Ahmad, N., & Ramzan, M. (2016). Stock Market Volatility and Macroeconomic Factor
Volatility. International Journal, 37.
Ali, H. (2014). Impact of interest rate on stock Market; Evidence from Pakistani market.
IOSR Journal of Business and Management, 16(1), 64–69.
Ali, R., & Khan, R. E. A. (2018). Socioeconomic stability and variability in stock market
prices: A case study of Karachi stock exchange. Asian Journal of Economic
Modelling, 6(4), 428–440.
Ali, S., Shahzad, S. J. H., Raza, N., & Al-Yahyaee, K. H. (2018). Stock market efficiency: A
comparative analysis of Islamic and conventional stock markets. Physica A:
Statistical Mechanics and Its Applications, 503, 139–153.
https://doi.org/10.1016/j.physa.2018.02.169
Farid, A., & Ashraf, J. (1995). Volatility at Karachi Stock Exchange. The Pakistan
Development Review, 34(4II), 651–657. https://doi.org/10.30541/v34i4IIpp.651-657
Fraz, A., & Hassan, A. (2016). Testing Information Efficiency using Random Walk Model:
Empirical evidence from Karachi stock exchange. Journal of Managerial Sciences,
10(2).
Gul, F., & Akhtar, N. (2016). Predictors of Investor Overconfidence in Karachi Stock
Exchange. Journal of Managerial Sciences, 10(2).
Hafeez, A. (2017). Modelling the Stochastic Behavior of the Pakistan Stock Exchange.
Journal of Basic and Applied Sciences, 13, 207–212.
Haque, N. U. (n.d.). Financial Market Reform in Pakistan, 17.
Hussain, A., Zaman, G., & Baloch, Q. B. (2014). The causal relationship of interest rate and
stock prices: empirical evidence from pakistani markets, 9.

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Ismail, R., Pervaz, A., Ahmed, A., & Iqbal, R. (2016). Macroeconomic Factors and the
Pakistani Equity Market: A Relationship Analysis. International Journal of
Innovation and Applied Studies, 15(1), 122.
Jebran, K., & Chen, S. (2017). Examining anomalies in Islamic equity market of Pakistan.
Journal of Sustainable Finance & Investment, 7(3), 275–289.
https://doi.org/10.1080/20430795.2017.1289455
Majeed, U., Raheman, A., Sohail, M. K., Bhatti, G. A., & Zulfiqar, B. (2015). Islamic
calendar events and stock market reaction: Evidence from Pakistan. Science
International, 27(3), 2559–2567.
Najaf, R., & Najaf, K. (2016). A study of Exchange rates movement and Stock Market
volatility. Asian Journal of Management, Engineering & Computer Sciences, 1(1),
p32–38.
Raza, H., Shah, S. A., & Malik, A. (2015). Day of the Week Anomaly and Market
Efficiency: Evidence from KSE-Pakistan. International Journal of Business and
Social Science, 6(9), 69–75.
Rizvi, S. A. R., Dewandaru, G., Bacha, O. I., & Masih, M. (2014). An analysis of stock
market efficiency: Developed vs Islamic stock markets using MF-DFA. Physica A:
Statistical Mechanics and Its Applications, 407, 86–99.
https://doi.org/10.1016/j.physa.2014.03.091
Sajid Nazir, M., Younus, H., Kaleem, A., & Anwar, Z. (2014). Impact of political events on
stock market returns: empirical evidence from Pakistan. Journal of Economic and
Administrative Sciences, 30(1), 60–78. https://doi.org/10.1108/JEAS-03-2013-0011
Shah, M. U. D., Shah, A., & Khan, S. U. (2017). Herding behavior in the Pakistan stock
exchange: Some new insights. Research in International Business and Finance, 42,
865–873.

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Shamshir, M., & Mustafa, K. (2014). Presence of day-of-the-week effect in the Karachi
stock market. Strategies, 5(19).
Sultan, K. (2018). Effects of Corporate Governance on Organization’s Performance:
Evidence from Karachi Stock Exchange (30 Index). International Journal of
Academic Research in Accounting, Finance and Management Sciences, 8(3), 63–72.
Turkyilmaz, S., & Balibey, M. (2014). Long Memory Behavior in the Returns of Pakistan
Stock Market: ARFIMA-FIGARCH Models. International Journal of Economics
and Financial Issues, 4(2), 400–410.
Uddin, M. T., Islam, M. S., & Majumder, A. (n.d.). Market Efficiency, Time-Varying
Volatility and Equity Returns in the Dhaka Stock Exchange, 20.

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Chapter No 2: Data Analysis
Figure: 1 Foreign Investment in Pakistan Stock Exchange:
Source: Pakistan Stock Exchange Data Portal.
The above graph is showing the Pakistan Stock Exchange (PSX) performance related to
foreign Investment form (2014-2018) for each quarter of the respective year. It’s showing
that the foreign investment is stable in the FY2014 but in other all the years are having
decreasing trend. According to this graph financial analysts will be able to conclude that the
foreign investors are not satisfied with the performance of PSX.
Figure: 2 Average Daily Volumes Trading Report:
Source: Pakistan Stock Exchange Data Portal
The above figure is showing the average daily volume traded in Pakistan stock Exchange.
You can see the consistency in the efficiency/ performance of the PSX in (FY2014-16) but a

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huge increase is observed in FY2017 and then a sudden decrease in FY2018 in the trading
volume of PSX.
Figure: 3 Market Capitalizations to GDP Ratio:
Source: Pakistan Stock Exchange Data Portal.
The above graph is showing the market capitalization to GDP ratio of Pakistan during the
period of (FY2014-18). Overall this graph is sowing the decreasing trend except FY2017.
The market capitalization to GDP ratio shows the relation of PSX performance and the
economy of Pakistan.
Figure: 4 Pakistan Stock Exchange Performances According to KSE-100 Index:
According to above figure, PSX performance in the context of KSE-100 in last 9 years form
(FY2010-18).Overall there is an increasing trend in the KSE-100 and just a slight decrease in
the FY2018. The researcher can suggested that the efficiency of PSX is satisfied according
the above mention results related to PSX.

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Figure: 5 Number of firms listed in Pakistan Stock Exchange:
The above figure is showing the No firms listed in Pakistan Stock Exchange form (FY2015-
18). There is consistency in this figure, except slight changes.
Figure: 6 No of Firms who are Making Profit and Giving Dividend:
The above figure is representing the percentage of firms listed in Pakistan Stock Exchange
who are making profit and giving dividend to its shareholders form (FY2014-17). Overall all
there is an increasing trend in both. Financial analysts can conclude the increasing trend in
the efficiency of Pakistan Stock Exchange.

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Table: 1
Correlation Analysis Results
No of
Listed
Firms
Total Listed
Capital KSE-100
Total Market
Capitalizations
Average Daily
Volume Traded
No of Listed
Firms 1 0 0 0 0
Total Listed
Capital 0.3781 1 0 0 0
KSE-100 0.5217 0.9287 1 0 0
Total Market
Capitalizations 0.4255 0.8282 0.9665 1 0
Average Daily
Volume Traded 0.4099 0.6933 0.8861 0.9673 1
The above table is showing the correlation results of the variables use in measuring the
efficiency of the Pakistan Stock exchange (PSX). The results show that the each variable is
having positive correlation between each other. It means that they have significant positive
impact in measuring the efficiency of Pakistan stock Exchange.
Conclusion:
he purpose of the study is to investigate the efficiency of Pakistan Stock
Exchange (PSX). In this regard, the data was collected form the Pakistan stock
exchange and the Security and Exchange Commission of Pakistan (SECP), the
literature of twenty articles is used to check the relationship of stock market
efficiency and the other impacts and variable that affects the efficiency of PSX. For
measuring the efficiency of PSX, Six variable come under consideration, that are the daily
volume traded in the stock market, no of firms listed in stock market, KSE-100 index
performance, market capitalization to GDP ratio, foreign investment inflows and outflows
and the percentage of firms making profit and giving dividend to its shareholder in the FY
2014-18. The results show that ups and downs in the stock market, the performance of stock
market in the years FY2014-2017 is quite well but a huge decrease in the year FY2018. It’s
predicated that the reason behind this is the political instability and economic crises in
Pakistan. Finally this study concludes that the Pakistan stock market is a Semi-strong market.
T

Stock market efficiency of pakistan stock exchange a review of literature from 1995 2018

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