Event Study and Impulse Indicator Saturation Analysis to Assess Reaction of Terrorist and Political Events: Evidence from Oil and Gas Sector of Pakistan

The objective of this study is twofold, first, to assess the impact of terrorist attacks and political events on returns and volatility oil and gas sector of Karachi Stock Exchange from the period of 2004 to 2014. Second, to compare the results of these events applying event study methodology, event dummy analysis and impulse indicator saturation.  Results indicate that the oil and gas sector reacts on the occurrence of terrorism and political events and the results of two methodologies event study and event dummy analysis are almost similar. However,  impulse  indicator saturation  is able to provide better results in comparison to event study and event dummy analysis because  as  it  captures  all  breaks  and  co-breaks  within  a  sample  period,  moreover  it clearly helps in defining rebounding period of the market. JEL Classification Codes: G12, G14