Market Efficiency: The Study of Pakistan Stock Exchange

Abstract

Information is a set of facts or news that has a both positive and negative impact on stock markets. Globally, Unpredictable events always create an environment of uncertainties in the stock markets and strongly attacks on developing markets. The market is informationally efficient if any new information comes into market and instantly reached to every investor. The focus of this research is to empirically explore the impact of COVID-19 event on Pakistan Stock Exchange to classify it either informational efficient or inefficient. For this research data is gathered from dated (January 2019 to June 2022) of daily closing stock prices to detect the volatility in stock market and also examine the persistence of volatility in degree of long run or short run. The simple random sampling technique is specified for this research and considered 54 companies for statistical analysis from the population of KSE-100 index. The empirical finding reveals that during an event of COVID-19 there is a positive mean returns with higher magnitude of volatility. Beside it there is a mixed results of short run or long run existence of volatility in different sectors of Pakistan Stock Exchange (KSE-100). Pakistan Stock Exchange (KSE-100) is considered as an inefficient market because there is a variation in stock returns and also seem an existence of a volatility cluster in financial market. The findings of this study will be helpful for the stock market investors to healthier understanding of an event’s impact on different sectors of Karachi Stock Exchange.