Open AccessEvaluating Post Merger Pakistan Stock Exchanges’ Market Efficiency
Author(s) -
MUHAMMAD AMIN KHAN,
Ihtesham Khan,
DR. ADNAN AHMAD
Publication year - 2021
Publication title -
journal of business and tourism
Language(s) - English
Resource type - Journals
eISSN - 2521-0548
pISSN - 2520-0739
DOI - 10.34260/jbt.v3i2.77
Subject(s) - stock exchange , stock market , business , extant taxon , primary market , market microstructure , portfolio , monetary economics , capital market line , market maker , financial economics , systematic risk , event study , financial market , market depth , economics , finance , order (exchange) , paleontology , context (archaeology) , horse , evolutionary biology , biology
The development and the formation of financial markets and institutions is indeed very instrumental for causing the robust economic growth. Although, as a fact the security prices are readily fluctuated by the market information known as market efficiency, making it a riskier investment. Subsequently, the investors accept the undiversifiable risk (Systematic risk) and cancel out the diversifiable risk (Unsystematic risk) through active diversified Portfolio Management, such a portfolio of securities, selected through market information reflects market efficiency. Thus, this study investigates the post- merger market efficiency for the Pakistan stock exchange as the three stock exchanges of the country has recently merged into Pakistan stock exchange. The analysis is based on event methodology, covering the pre-post-merger accumulated daily abnormal returns for a duration of 90 days (three months). Thus, the study proofs with respect to the accumulated daily abnormal returns, that the merger has increased the market efficiency. Consequently, the study supports the extant literature on merger and related market efficiency and provides another empirical evidence with respect to a developing country such as Pakistan. Rationally, the recent increase in the market efficiency will assure the supply of correct market information; consequently, boosting confidence of all investors and the regulators have a great opportunity to pursue continuous improvement in the present regulatory polices to promote healthy investment environment and increase the national revenue as well.