Assignment no.

2
09-Muhammad Jahangir ilyas
In this paper the researcher empirically sees that how stock price and volatility is effected due to financial crises in
ASE of emerging markets. The researcher observed the 18 years financial crisis on stock prices and volatility from
1992 to 2009. And see the volatility and stock price in ASE during local, regional and global events.
And empirically sees the crises effect on the following sectors banking, insurance, industrial and services. There are
many researches takes places previously on stock price and volatility but only a few also include the financial crisis
in their research. The researcher uses the reference of the researches that are related to his research to validate his
research. And he researcher adopt the two researches, one of Mishkin (2002) who defines the stock market price as
20% fall in the stock market and the other is of Patel and Sarkar (1998) who defines the stock price as 35% decline
due to crash in stock market of emerging countries, so this paper further extends these researches of Mishkin 2002
and Patel & Sarkar 1998 by adopting a third scenario to account only for the crisis of 2008 to 2009. Data that is
collected from 1992-2009 is of different frequencies monthly, weekly and daily closing prices for ASE general
weighted price. General Autoregressive conditional heteroskedasticity mean model is used to observe the
differences in variance and also Chow test is used to check, either the relation between variables is stable or not. In
literature view the researcher provides the references of different researcher to validate his research as also see the
effect of independent and dependent variable and also independent variables relation either there relation is
significant or not by using multi-regression formula. And use log for change the data into liner form from
exponential form. And the also showed that financial crises has an effect on stock price and also on volatility and
sees that there is an inverse effect of volatility on stock price. But the volatility is increases as stock price decreases.
The global events also cases of financial crises and effects almost all markets especially the emerging markets
whose volatility as compared to developed market is much higher, and their impact on stock price is much greater
than developed markets, but there may also be other local factors also, which can cause crises such as of political,
economic and may be social events and many other, so we also include them in the cause of crises. Also due to
financial crises the economy of the country also effected as a result in the decrease in the GDP. As the relationship
of stock market and volatility is concerned the is a positive relation but the relationship is not the significant but it is
insignificant it is due to the reason as volatility also depends upon the business cycle and also on the investors
mood.so their relationship is positive but weak. For interpretation of results the researcher uses the econometrics
formulas, linear regression formulas. The data is basically the time series data. A research also uses the dummy
variables to check the effect of crises. The results shows that in 2008 the effect of financial crisis is much higher
than other previous years, and the decline of stock returns is much more than 20 and 35 percent declines. The
relation of is inversely effect the stock price. And from the sub sectors the banking sector is much affected as a
result of financial crises and it also inversely affected from crises. This research is help full for policymakers. There
is a limitation of this paper that it not include complete world economies so further research can be made bay
include other world economies.