Announcement Impact of CPEC on PSX

Abstract

In 2013, Chinese government decided to initiate economic corridors, this initiative was named as One Belt One Road (OBOR) by Chinese government. OBOR initiative consisted of multiple corridors, including China-Pakistan Economic Corridor (CPEC). Our focus of this research paper is CPEC. CPEC implementation consists of different projects, these projects are related to energy, road infrastructure and improvements and extension to existing railroad. CPEC lead projects and investments are expected to uplift Paki<;tnn and Chinese economy and accelerate overnll economic growth. CPEC lead projects and investments are also expected to also have an impact on stock market returns. Our research aims to investigates the effects on share price of tlu·ee main sector listed on Pakistan Stock Exchange (Karachi Stock Exchange) around event leading to signing of the China-Pakistan Economics Corridor (CPEC) agreement. The purpose of testing the average abnormal return and cumulative abnonnal return and effect of index (using standard event study methodology) around key event related to the CPEC agreement is to capture the pre-effect and post effect that this historical agreement may play in the fl.1ture economic growth of the Islamic Republic of Pakistan. The evidence of positive share price effects of the agreement on three main sector that represent major market of the country is of significant value to the both countries Pakistan and China.