Abstract
The study aims to test the semi strong form of market efficiency by analyzing the reaction of Pakistani stock market to natural disaster and terrorism effects. This study is unique and special in its nature as this is the first kind of study on natural disasters and terrorism effects on stock market of Pakistan. This paper is based on event study, taking the data of KSE-100 index on daily basis from 2005 to 2010 comprising of two natural disasters and five major terrorist attacks in the country, and their impact on the Karachi Stock Exchange. Calculations were based on before and after the event, then by calculating the cumulative average returns and abnormal returns, results were calculated. The article shows that the market is efficient in the context of terrorist attacks, while in case of natural disaster market is inefficient.
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