The event study methodology analyzes the effect of events, like terrorism in Karachi, on dependent variables such as stock exchange prices. Specifically, this study will use the event methodology to investigate the impact of terrorist events in Karachi on stock prices and seek to determine if there are any unexpected changes associated with the events. It will also explore the significance of any abnormal returns related to the events. The study assumes efficient markets, meaning the effects of events are immediately reflected in stock prices, allowing analysis over relatively short periods.

1. The event study methodology studies the effect of an event on a specific
dependent variable. In the particular study, the event methodology is used to
investigate the effect of terrorismevents in Karachi on stock exchange which is
considered dependent variable. The event study is the study of abnormalreturns
(beyond expectation change in stock prices) over a specific period of time which
called event window. By using event study methodology, the particular study will
seeks to describe whether there is any unexpected change in stock price
associated with the event. The study will explore the significance fromabnormal
return associated with the event.
The study assumefor using event study mythology that market is efficient. By
assuming that market is efficient, the effects of such events will reflect stock
prices immediately and study will review relatively in shortperiod.
Procedureof event study composition;
1) Identification of terroristevent
2) Identification of estimation of pre-event, event and postevent windows
(periods)
3) Estimation of parameters using estimation window data
4) Measuring of abnormalreturns in the event window
5) Aggregating abnormal returns