Effect of Pakistan GCC Bilateral Trade Agreement on Pakistani Stock Market: An Event Study Methodology

Abstract

The goal of this study is to examine the intricate connections between industry-specific capital market responses in a developing country such as Pakistan. In particular, the analysis focuses on the Pakistan–GCC bilateral trade agreement and its impact across different sectors. Using an event study methodology, this article analyzes how the Pakistan-GCC Bilateral Trade Agreement (BTA) has affected the Pakistani share market. Pakistan's textile, food, and petroleum and oil industries all show positive responses, while other sectors react unfavorably. These findings induced an immediate reaction from chosen Pakistani industries.  The positive reactions of the industries are encouraging for the economy as well as for shareholders. Therefore, the Pakistan Stock Exchange was susceptible to this incident. To the best of my knowledge, this paper is unique in a sense that it will assist the stockholders and decision makers of trade policy. Moreover, the sectoral focus of the analysis represents an important contribution. The study also examines the unique context of the Pakistan–GCC relationship, which has received limited attention in the existing literature.