Market miracles: Resilience of Karachi stock exchange index against terrorism in Pakistan

Figures & data

Figure 1. Civilian fatalities, security personal fatalities, terrorist murdered, total fatalities and KSE 100 index.

Source: Created by authors.

Figure 2. Response of KSE-100 index against multiple disruptions such sectarian injured, sectarian killed, sectarian violence incidents, drone attacks, killed in drone attacks, Shia killed, Shia killed incidents, attacks on mosques, attacks on mosques killed, suicidal attacks, suicidal attacks injured.

Source: Created by authors.

Table 1. Descriptive statistics

Variables	Obs.	Min	Maximum	Mean	Std. Deviation	Skewness		Kurtosis
	N	Statistic	Statistic	Statistic	Statistic	Statistic	Std. Error	Statistic	Std. Error
Karachi stock exchange indexes(KSE-100 index)	156	2399.14	29984.00	12082.77	6705.22	1.188	.202	1.033	.401
Sectarian killed	156	0	181	24	32.786	2.229	.202	5.836	.401
Killed in drone attacks	156	0	145	20	28.767	1.815	.202	3.446	.401
Total Civilian fatalities	156	0	432	138	107.260	.603	.202	−.305	.401
Army personal fatalities	156	0	157	41	34.433	1.058	.202	1.200	.401
Terrorist murdered	156	0	1590	208	264.002	2.359	.202	7.498	.401
Total fatalities	156	1	2024	388	351.009	1.496	.202	3.807	.401
Killed in mosque attacks	156	0	103	8.0	18.810	3.088	.202	10.228	.401
Exchange Rate(USD/PKR)	156	56.00	106.60	79.55	17.03992	.000	.202	−1.550	.401
Attack on mosques	156	0	6	0.65	0.946	2.2	0.202	7.5	.401
Valid N (list wise)	156

Table 2. ADF unit root test

Variables	At Level		First Differencing		Order of integration
	Intercept	Intercept and trend	Intercept	Intercept and trend
KSE-100INDEXES	−0.59	−1.12	−11.78***	−16.58**	I(1)
Armyperosnalkilled	−4.17***	−8.22**			I(0)
civilliankilled	−1.91*	−10.13**			I(0)
terroristkilled	−2.65***	−13.19**			I(0)
Totalfatalities	−3.17**	−13.81**			I(0)
killedinmosqueattacks	−1.55*	−14.52***			I(0)
killedindroneattacks	−4.87***	−15.10**			I(0)
secteriankilled	−4.76***	−17.32***			I(0)
attacksonmosque	−3.61**	−12.27**			I(0)
exchangerate	−0.91	−0.11(0.65)	−4.10**	−6.19***	I(1)

Table 3. PP unit root test

Variables	At Level		First Differencing		Order of Integration
	Trend	Intercept	Trend	Intercept
KSE-100INDEXES	−0.21	−1.39(.18)	3.57***	4.12***	I(1)
Armyperosnalkilled	−2.54**	−3.19***(0.003)			I(0)
civilliankilled	−2.19**	−5.33***(.0010)			I(0)
terroristkilled	−2.95***	−6.9***(0.0009)			I(0)
Totalfatalities	−4.87***	−7.6***(0.0076)			I(0)
killedinmosqueattacks	−2.33**	−5.6***(0.0073)			I(0)
killedindroneattacks	−2.49**	−3.97(0.0052)			I(0)
secteriankilled	−2.43**	−4.87**(0.035)			I(0)
attacksonmosque	−2.60**	−6.78***(000.9)			I(0)
exchangerate	−0.34	−1.58(0.94)	2.54**	3.15**	I(1)

Table 4. KPSS unit root test

Variables	At Level		First Differencing		Order of Integration
	Intercept	Intercept and trend	Intercept	Intercept and trend
KSE-100INDEXES	1.2	1.45	0.34(0.46)	0.35(0.78)	I(1)
Armyperosnalkilled	0.28	0.15			I(0)
civilliankilled	0.11	0.02			I(0)
terroristkilled	0.36	0.01			I(0)
Totalfatalities	0.20	0.10			I(0)
killedinmosqueattacks	0.16	0.098			I(0)
killedindroneattacks	0.36	0.22			I(0)
secteriankilled	0.46	0.31			I(0)
attacksonmosque	0.47	0.55	0.10(0.48)	0.06(0.48)	I(1)
exchangerate	1.65	1.50	0.16(0.95)	0.30(0.60)	I(1)

NOTE: () are critical values, if KPSS test statistics is greater than critical value then we will reject null hypothesis of stationarity.

Table 5. BDS test for independence and identical distribution of time series

Variables	M = 2	M = 3	M = 4	M = 5	M = 6
Armyperosnalkilled	0.0148**	0.0216*	0.0361***	0.0292*	0.0309***
civilliankilled	0.0206***	0.0261**	0.0312**	0.0393***	0.0355***
terroristkilled	0.0749*	0.0852**	0.0825**	0.0856**	0.0941*
Totalfatalities	0.0120**	0.0171**	0.0165*	0.0196***	0.0217***
killedinmosqueattacks	0.0756***	0.0747*	0.0789**	0.0931*	0.0909***
killedindroneattacks	0.0101*	0.0209*	0.0353***	0.0471*	0.0697***
secteriankilled	0.049**	0.0707***	0.0851**	0.089**	0.0910**
attacksonmosque	0.069*	0.0698**	0.065**	0.071**	0.0756***
exchangerate	0.0446**	0.0425**	0.046*	0.0501**	0.0620**

Table 6. ARDL co-integration results

Value of K	F-statistics	Significance	Lower-bound	Upper-bound
9	2.34	10%	1.98	2.94
		5%	2.26	3.28
		2.5%	2.53	3.61

Table 7. NARDL estimation

Variables	Coefficient	Lag1	Lag2
Short run effects
∆Armyperosnalkilled+	−0.124***(−3.06)	−0.1125*(−1.97)	−0.1934
∆Armyperosnalkilled-	0.165	0.179	0.1487
∆Civilliankilled+	0.0186**(2.58)	0.0125*(2.05)	0.050*(1.87)
∆Civilliankilled-	0.46
∆Terroristkilled+	0.2656***(3.87)	0.1929*(1.82)
∆Terroristkilled-	0.20	0.17	0.176
∆Totalfatalities+	0.0262**(2.29)	0.0112*(1.79)	0.063*(1.75)
∆Totalfatalities-	0.0245*(1.81)
∆Killedinmosqueattacks+	−0.376**(−2.75)	−0.1949**(−3.09)	−0.1786**(−2.98)
∆Killedinmosqueattacks-	0.12976	0.1817	0.3454
∆Killedindroneattacks+	−0.069***(−3.87)	−0.208**(−3.30)	−0.141**(−2.98)
∆Killedindroneattacks-	−0.037	−0.054	−0.0876
∆Secteriankilled+	0.032**(2.58)		0.042
∆Secteriankilled-	0.298	0.846	−0.214
∆Attacksonmosue+	−0.2929**(−3.09)	−0.1727	−0.1018**(−2.98)
∆Attacksonmosque-	122.87	56.87
∆Exchangerate+	−0.15**(−2.42)		0.32
∆Exchangerate-	0.21**(2.29)	0.10	0.98*(1.82)
$EC{M}_{t-1}$	−0.29***
Long-run results
Armyperosnalkilled+	0.02964*(1.94)	0.03171*(1.77)
Armypersonalkilled-	0.10
Civilliankilled+	0.0139*(1.66)		0.029*(1.82)
Civiliankilled-	0.082
Terroristkilled+	0.1943**(2.22)		0.091*(1.91)
Terroristkilled-	0.21
Totalfatalities+	0.07*(1.97)	0.01*(1.89)
Totalfatalities-	0.01
Killedinmosqueattacks+	0.02
Killedinmosqueattacks-	0.0043
Killedindroneattacks+	0.0076
Killedindroneattacs-	0.0012
Secteriankilled+	0.019
Secteriankilled-	0.044
Attacksonmosque+	0.021*(1.88)
Attacksonmosque-	0.01
Exchangerate+	−0.054**(−2.55)	−0.02***(2.30)
Exchnagerate-	0.02
Residual diagnostics
Autocorrelation LM Test	1.55(0.18)
Hetrosekdasticity BP Test	1.27(0.28)
Ramsey Reset test	1.51(0.2237)
Normality JB Test	1.43(0.55)
R-square	91.76

Notes: t values are in parenthesis, but in case of residual diagnostics parenthesis consists of P values.

Table 8. Asymmetrical co-integration test with bound testing approach

Value of K	F-statistics	Significance	Lower-bound	Upper-bound
18	4.02	10%	1.85	2.85
		5%	2.11	3.15
		2.5%	2.33	3.42

Table 9. Wald test for short-run and long-run asymmetries

Short run Asymmetries	Long run asymmetries
$Waldtes{t}_{armyperosnalkilledSR=}$2.15**	$Waldtes{t}_{armyperosnalkilledLR=}$1.76*
$Waldtes{t}_{terroristkilledSR=}$7.16***	$Waldtes{t}_{terroristkilledLR=}$3.43**
$Waldtes{t}_{civiliankilledSR=}$5.39**	$Waldtes{t}_{civiliankilledLR=}$0.98
$Waldtes{t}_{secteriankilledSR=}$2.98**	$Waldtes{t}_{secteriankilledLR=}$0.46
$Waldtes{t}_{totalfatalitiesSR=}$1.19	$Waldtes{t}_{totalfatalitiesLR=}$2.05
$Waldtes{t}_{attacksonmosqueSR=}$9.19***	$Waldtes{t}_{attacksonmosqueLR=}$1.91*
$Waldtes{t}_{killedinmosqueattackSR=}$5.87**	$Waldtes{t}_{killedinmosqueattackLR=}$2.11**
$Waldtes{t}_{killedindroneattackSR=}$11.18***	$Waldtes{t}_{killedindroneattackLR=}$7.76**
$Waldtes{t}_{exchnageratesSR=}$4.76*	$Waldtes{t}_{exchnageratesLR=}$3.54***

Figure 3. CUSUM of square and CUSUM stability test for NARDL model.