Impact Of Monetary Policy Announcements On Stock Prices: Evidence From Pakistan Stock Exchange
This study examines the impact of monetary policy announcement on stock prices listed on Karachi stock exchange for the period 1998-2012. The Monetary policy announcements are extracted from the report published by the State bank of Pakistan from 1998 to 2012 and KSE-100 index prices. Forty-two monetary policies were announced during this period of study. This study used an event study consists of an event window of 21 days and a simple t-test has been applied to test the statistical significance of the returns generated. We use the market model to estimate the abnormal returns (AR) and cumulative average abnormal returns (CAAR) around the monetary policy announcement dates for these securities. The results reveal that policy announcements do generate AR, CAAR and prove to be significant. The finding of research indicates that the Efficient market hypothesis does not hold for the Pakistani stock market and shows market in-efficiency.
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