The financial cost of rivalry: A tale of two South Asia neighbors

Sheraz Ahmed*, Syed Mujahid Hussain

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

Abstract

We examine the effect 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 news related to military aggression in a reciprocal way. Moreover, while the volatility of India's stock market seems to show a subdued response to bilateral political news, Pakistan's stock market appears to be sensitive to both political and military news originating from either country. The relatively stronger effect of military events can be attributed to a higher financial cost of confrontation between the two countries.

Original languageEnglish
Pages (from-to)35-60
Number of pages26
JournalEmerging Markets Finance and Trade
Volume50
DOIs
Publication statusPublished - May 1 2014

Keywords

  • Confidence-building measures
  • Emerging markets
  • Military news
  • Political risk
  • Spillovers
  • VAR-EGARCH.

ASJC Scopus subject areas

  • Finance
  • Economics, Econometrics and Finance(all)

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