This paper examines the impact of bilateral political and military news on the returns and volatility of the stock markets of India and Pakistan. Our results show that the volatility of both stock markets shows a significant reaction on the arrival of the news related to military aggression in a reciprocal way. Moreover, while the Indian stock market’s volatility seems to show a subdued response to bilateral political news, the Pakistani stock market appears to be sensitive to both political and military news originating from either country. The relatively stronger impact of military events can be attributed to a higher financial cost of confrontation between two countries.
|Peer-reviewed scientific journal||Emerging Markets Finance and Trade|
|Issue number||Supplement 3|
|Number of pages||26|
|Publication status||Published - 2014|
|MoE publication type||A1 Journal article - refereed|
- 512 Business and Management
Ahmed, S., & Hussain, M. (2014). The Financial cost of rivalry: A tale of two South Asian neighbours. Emerging Markets Finance and Trade, 50(Supplement 3), 35-60. https://doi.org/10.2753/REE1540-496X5003S303