International Business College, Shaanxi Normal University, Xi'An, Shaanxi Province, China.
Department of Management Sciences, The Islamia University of Bahawalpur, Punjab, Pakistan.
PLoS One. 2023 Oct 19;18(10):e0292284. doi: 10.1371/journal.pone.0292284. eCollection 2023.
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.
股票市场是经济的晴雨表，反映了经济的整体健康状况和发展方向，受到社会、环境和政治等不同因素的影响。研究政治不稳定对股票市场表现的影响非常重要，特别是对新兴经济体而言。因此，我们旨在研究政治不稳定与巴基斯坦股票市场表现之间的关系。为了实现我们的目标，我们使用了 1996 年至 2021 年的历史数据。数据来自 DataStream 数据库。MSCI 指数被用作所选国家股票市场表现的代理变量。在研究中使用了世界治理六个指标，将政治不稳定指数作为主要解释变量，集中关注政治不稳定指数。我们使用了回归分析，但为了确保研究结果的准确性，通过 GMM 方法并将 GDP 作为另一个内生变量进行了双向稳健性分析。我们的研究结果表明，政治稳定对股票市场表现有显著的积极影响，而政治不稳定则对股票市场表现有负面影响。此外，其他治理指标对表现有显著的积极影响。然而，政治不稳定会扰乱经济活动，导致投资者信心下降，同时也会减少外国投资，增加国家风险。此外，我们的研究对投资者具有一定的启示意义，他们可以通过多元化投资组合来降低风险，政策制定者可以通过控制政治不稳定来增加外国直接投资。
