IMF Announcement and Stock Market Reaction: A Comparative Analysis of Pakistan and Greece Stock Market

Abstract

IMF is playing key role in setting failed economies on right track by providing technical advice and financial assistance. But little has been researched on repercussions, of how during this time of uncertainty when a country approaches the International Monetary Fund (IMF) investors behave and its impact on stock market . This study is aimed at examining the reaction of Pakistan stock market and Greece stock market to IMF announcements. Time series data from 2009 to 2019 has been gathered for analysis. Time series data is highly volatile in nature high returns period is followed by low returns period for this reason we have used GAARCH method for empirical testing. Stock market returns are used as dependent variables and dummy independent variable were created using country specific categorized data of good and bad news from IMF. The study has found that IMF news have impact on stock market returns whether its good news or bad news. Focusing on individual country good news from IMF have insignificant positive impact on PSX whereas bad news have significant negative impact on PSX. In case of Greece good news from IMF have significant positive impact and bad news have insignificant negative impact on ASE.