Impact of Political Event on Trading volume and Stock Returns: The Case of KSE

Abstract

This paper examines the relationship between aggregate stock market trading volume and of daily stock returns during 18th Feb 2008- 18th Feb 2009, on KSE 100 index, in order to evaluate the impact of non-informational trade due to events. The time horizon of the study is time series analysis with a setting of field study. We employ Phillips Perron unit root test to investigate the relationship between trading volume and stock returns. It indicates that stock returns moved too much due to change in the fundamentals, aggregate expected returns. The same results found in the pre and the post-resignation period of Ex President Pervez Musharaf. Political events affect the stock price due to which the trading volume and stock return fluctuate positively or negatively as per the intensity of the event.

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