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The relationship between political instability and stock market performance: An analysis of the MSCI index in the case of Pakistan

The stock market is the barometer of the economy that reflects the overall health and direction of the economic development and is affected by different factors including social, environmental and political. It is important to investigate the effect of the political instability on the stock market p...

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Detalles Bibliográficos
Autores principales: Mai, Zhiying, Nawaz Saleem, Hassan Mujtaba, Kamran, Muhammad
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10586669/
https://www.ncbi.nlm.nih.gov/pubmed/37856493
http://dx.doi.org/10.1371/journal.pone.0292284
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author Mai, Zhiying
Nawaz Saleem, Hassan Mujtaba
Kamran, Muhammad
author_facet Mai, Zhiying
Nawaz Saleem, Hassan Mujtaba
Kamran, Muhammad
author_sort Mai, Zhiying
collection PubMed
description The stock market is the barometer of the economy that reflects the overall health and direction of the economic development and is affected by different factors including social, environmental and political. It is important to investigate the effect of the political instability on the stock market performance, especially on emerging economies. Therefore, we aim to study the relationship between political instability and stock market performance in Pakistan. To meet our objectives, we used past data from 1996 to 2021. Data are collected from the DataStream data base. MSCI indices are used as the proxy for the Stock market performance of the selected country. World governance six indicators are used in the study as the explanatory variable concentrating the political instability index as the main explanatory variable. Regression analysis is used but two-way robustness analysis was done for the accuracy of the findings through GMM methods and taking GDP as another endogenous variable. Our findings shows that the political stability has significant positive impact on the stock market performance while, political instability has negative impact on stock market performance. Moreover, other governance indicators has a significant positive impact on performance. However, political instability disrupts the operations and economical activities that leads to decrease the investor confidence and also decrease the foreign investment with the increment of the risk in the country. Moreover, our study has some implications for investors to develop the diversified portfolio to minimize the risk and policy makers can increase their foreign direct investment within the economy by controlling the political instability.
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spelling pubmed-105866692023-10-20 The relationship between political instability and stock market performance: An analysis of the MSCI index in the case of Pakistan Mai, Zhiying Nawaz Saleem, Hassan Mujtaba Kamran, Muhammad PLoS One Research Article The stock market is the barometer of the economy that reflects the overall health and direction of the economic development and is affected by different factors including social, environmental and political. It is important to investigate the effect of the political instability on the stock market performance, especially on emerging economies. Therefore, we aim to study the relationship between political instability and stock market performance in Pakistan. To meet our objectives, we used past data from 1996 to 2021. Data are collected from the DataStream data base. MSCI indices are used as the proxy for the Stock market performance of the selected country. World governance six indicators are used in the study as the explanatory variable concentrating the political instability index as the main explanatory variable. Regression analysis is used but two-way robustness analysis was done for the accuracy of the findings through GMM methods and taking GDP as another endogenous variable. Our findings shows that the political stability has significant positive impact on the stock market performance while, political instability has negative impact on stock market performance. Moreover, other governance indicators has a significant positive impact on performance. However, political instability disrupts the operations and economical activities that leads to decrease the investor confidence and also decrease the foreign investment with the increment of the risk in the country. Moreover, our study has some implications for investors to develop the diversified portfolio to minimize the risk and policy makers can increase their foreign direct investment within the economy by controlling the political instability. Public Library of Science 2023-10-19 /pmc/articles/PMC10586669/ /pubmed/37856493 http://dx.doi.org/10.1371/journal.pone.0292284 Text en © 2023 Mai et al https://creativecommons.org/licenses/by/4.0/This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
spellingShingle Research Article
Mai, Zhiying
Nawaz Saleem, Hassan Mujtaba
Kamran, Muhammad
The relationship between political instability and stock market performance: An analysis of the MSCI index in the case of Pakistan
title The relationship between political instability and stock market performance: An analysis of the MSCI index in the case of Pakistan
title_full The relationship between political instability and stock market performance: An analysis of the MSCI index in the case of Pakistan
title_fullStr The relationship between political instability and stock market performance: An analysis of the MSCI index in the case of Pakistan
title_full_unstemmed The relationship between political instability and stock market performance: An analysis of the MSCI index in the case of Pakistan
title_short The relationship between political instability and stock market performance: An analysis of the MSCI index in the case of Pakistan
title_sort relationship between political instability and stock market performance: an analysis of the msci index in the case of pakistan
topic Research Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10586669/
https://www.ncbi.nlm.nih.gov/pubmed/37856493
http://dx.doi.org/10.1371/journal.pone.0292284
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