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Testing for Market Efficiency in Emerging Markets: A Case Study of the Karachi Stock Market
Khalid Mustafa and Mohammed Nishat
Published:Jan - June 2007
This paper investigates the efficiency of the Karachi stock exchange
(KSE) with corrections for thin trading and non-linearity as suggested by
Miller, Muthuswamy and Whaley (1994). Daily, weekly, and monthly data
on stock prices from December 1991 to May 2003 have been used, with
three non-overlapping periods (December 1991 to May 1998; May 1998 to
September 2001; and September 2001 to May 2003) and one combined
period (May 1998 to May 2003). The results indicate that the Karachi
Stock Market is efficient for the overall period, the three sub-periods, and
the combined period in linear and non-linear behavior after making
adjustments for thin trading. The same result is observed when the
efficiency test is conducted on weekly and monthly data after adjusting for
thin trading during the overall study period.
KEYWORDS:
Karachi Stock Exchange, KSE, efficiency, market, Pakistan.
JEL:
N/A.
Analysis of Economic Efficiency and Competitiveness of the Rice Production Systems of Pakistan’s Punjab
Waqar Akhtar, Muhammad Sharif and Nadeem Akmal
Published:Jan - June 2007
The Policy Analysis Matrix (PAM) methodology was used to
determine the level of economic efficiency and competitiveness in the
production of rice crops in Pakistan’s Punjab. The methodology was also
used to assess the effect of policy intervention on the production of Basmati
and IRRI rice crops. The results indicate that an expansion of the
production of Basmati rice can lead to an increase in exports. The
production of IRRI in Pakistan’s Punjab is characterized by a lack of
economic efficiency implying inefficient use of resources to produce the
commodity. On the other hand, both Basmati and IRRI rice production in
the Punjab demonstrate a lack of competitiveness at the farm level for the
period under analysis. The analysis shows that the prevailing incentive
structure affected farmers negatively. A negative divergence between private
and social profits implies that the net effect of policy intervention is to
reduce the farm level profitability of both rice production systems in
Punjab. The results highlight the need for removing existing policy
distortions in the structure of economic incentives to enhance economic
efficiency and to attain farm level competitiveness in rice production.
KEYWORDS:
Pakistan, Punjab, Policy Analysis Matrix, PAM, policy intervention.
JEL:
N/A.
Sustainability of Feed-based Aquaculture in Bangladesh
Md. Rais Uddin Mian
Published:Jan - June 2007
Six carp and carp based culture technologies were selected to
examine the sustainability of supplementary feed-based aquaculture through
availability of domestic feeds compared to the total requirement in
Bangladesh. The study covered seven districts of Bangladesh with a sample
size of 376. It was found that farmers used a good number of feeds (more
than 35) for the selected technologies but they maintained no standard
doses for them. There were important differences among the prices of
different feeds and other inputs used for different technologies in different
parts of the country. Prices of all inputs were found to be increasing and
this increase has been greater in recent years as compared to previous
years. Though all the technologies were found to be profitable, the feed
situation was not satisfactory. Except for rice polish, the supplies of other
local feeds were unable to meet the national demand. If this situation
persists and no measures are taken to secure the local feed supply, the
present development of supplementary feed-based aquaculture will become
dependent on imported feeds and would not be sustainable in the future.
This study strongly suggests that the authorities should handle the matter
with proper attention, considering its significant impact in the economy of
the country.
KEYWORDS:
Bangladesh, feed-based aquaculture, sustainability, technologies.
JEL:
N/A.
Published:Jan - June 2007
Inayatullah, Rubina Saigol, Pervez Tahir (Eds), Social Science in
Pakistan: A Profile, Council of Social Science Pakistan (COSS), Islamabad,
2005, pp 512, Price Pak Rs. 500, US $ 20.
Social scientists study various facets of human society. Historically,
societies were understood and explained through religious and philosophical
texts. History, Philosophy and Politics also developed as independent
disciplines. One thinks of Plato’s Republic, Chanakya’s Arthashastra, and
histories by various Greek, Roman, Arab, Persian, Turk, Chinese and Indian
writers. One notable contribution to the study of societies is by Ibn
Khaldun, the 14th century Tunisian, considered the first sociologist of the
world.
KEYWORDS:
Book review, social science, Pakistan.
JEL:
N/A.
Technical Efficiency and its Determinants in Potato Production, Evidence from Punjab, Pakistan
Abedullah, Khuda Bakhsh and Bashir Ahmad
Published:July - Dec 2006
Potato cultivation accounts for 5.71 percent in total cropped area of the Punjab province and it supplements the diet of the growing population at lower prices as compared to grains, meat and chicken. Data from 100 farmers, 50 each from the districts of Okara and Kasur during the year 2002-2003 (the autumn crop) has been collected. The study estimates the technical efficiency in potato production by employing the Cobb-Douglas stochastic production frontier approach. The null hypothesis of no technical inefficiency in the data is rejected. Our results indicate that potato farmers are 84 percent technically efficient, implying significant potential in potato production that can be developed. By shifting the average farmer to the production frontier, the average yield would increase from 8.33 tons per acre to 9.92 tons per acre using the available resources. The additional quantity of potatoes gathered through efficiency improvements would generate Rs. 990.81 ($16.51) million of revenue each year. Consultation with extension workers significantly contributes to the improvement of technical efficiency and implies that the extension department should be one of the major targeted variables from the policy point of view in order to improve technical efficiency in potato production.
KEYWORDS:
Potato, stochastic production frontier, technical efficiency.
JEL:
QR.
Technical Efficiency of Some Selected Manufacturing Industries in Bangladesh: A Stochastic Frontier Analysis
Md. Azizul Baten, Masud Rana, Sumonkanti Das and Md. Abdul Khaleque
Published:July - Dec 2006
This paper investigates the technical efficiency of selected manufacturing industries of Bangladesh using a stochastic frontier production function approach suggested by Battese and Coelli (1992) applied to panel data. A feasible Cobb-Douglas stochastic frontier production function, which has time-varying technical inefficiency effects, was estimated. Two alternative distributions were used to model the random inefficiency term: a truncated normal distribution and a half-normal distribution. The estimated average technical efficiency for four groups of industries of Bangladesh over the reference period was 40.22% of potential output for the truncated normal distribution, whereas it was 55.57% of potential output for the half-normal distribution.
KEYWORDS:
Stochastic frontier, Production function, Technical efficiency.
JEL:
N/A.
Willingness to Pay for Margalla Hills National Park: Evidence from the Travel Cost Method
Himayatullah Khan
Published:July - Dec 2006
This study, which is among the first in Pakistan to value recreational benefits, estimates the benefits of the Margalla Hills National Park near Islamabad. The study examines how much park visitors are willing to pay to visit the park. Annual benefits from the park are considerable—the total annual consumer surplus or economic benefit obtained from recreation in the park is approximately Rs. 23 million (US $ 0.4 million). Various factors influence the value visitors obtain from the park — these include travel cost, household income, and the quality of the park. Improvements in the quality of the park are estimated to increase recreational benefits by 39%. The study recommends that a park entrance fee of Rs. 20 per person be introduced, which could be utilized for park management. This would generate nearly Rs. 11 million in revenues annually, a sizable amount of money that represents about 4% of the annual budget allocated to the environment sector in Pakistan.
KEYWORDS:
Environmental valuation, willingness to pay, total recreational value, consumer surplus, environmental resources, national parks, Pakistan.
JEL:
N/A.
Population Growth and Economic Development: Test for Causality
Khalid Mushtaq
Published:July - Dec 2006
This paper examines the existence of a long-run relationship between population and per capita income in Pakistan for the period 1960-2001 using cointegration analysis. Unit root results show that population is integrated of order zero while per capita income is integrated of order one; further, Johansen’s procedure show that no long-run cointegrating relationship exists. Thus, population growth neither causes per capita income growth nor is caused by it. A corollary is that population growth neither stimulates per capita income growth nor reduces it.
KEYWORDS:
Pakistan, population growth, economic development, per capita income.
JEL:
N/A.
Regulatory Response to Market Volatility and Manipulation: A Case Study of Mumbai and Karachi Stock Exchanges
Jamshed Y. Uppal and Inayat U. Mangla
Published:July - Dec 2006
This study examines the regulatory intervention in India and Pakistan in response to episodes of excessive market volatility and manipulation and its effectiveness in achieving declared objectives. Our empirical analysis indicates that while the Indian regulatory agencies seem to have achieved their objectives in curtailing manipulative and speculative behavior, there appears to be little impact on such behavior in the case of the Karachi Stock Exchange. Significant differences in the regulatory effectiveness and industry structure may explain the difference in the market behavior outcomes following regulatory interventions. A stronger competitive environment in India, because of the existence of multiple organized exchanges, seems to facilitate effective enforcement of public policy.
KEYWORDS:
Pakistan, India, regulatory intervention, speculative behavior, Karachi stock exchange.
JEL:
N/A.
Role of the Futures Market on Volatility and Price Discovery of the Spot Market: Evidence from Pakistan’s Stock Market
Safi Ullah Khan
Published:July - Dec 2006
This paper focuses on the role of the financial futures market in the volatility of Pakistan’s stock market and determines whether the stock futures price is capable of providing some relevant information for predicting the spot price. The Generalized Autoregressive Conditional Heteroscedasticity (GARCH) approach is used to measure volatility in the spot and the futures market and to analyze the relationships between spot and futures market volatility. Causality and feedback relationships between the two markets are analyzed and determined through the Vector Error Correction Model (VECM). Empirical results support the evidence that spot prices generally lead the futures prices in incorporating new information, and that volatility in the futures market does not increase volatility in the spot market. Rather the study finds more consistent support for the alternative hypothesis that volatility in the futures market may be an outgrowth of the volatile spot market.
KEYWORDS:
Pakistan, stock market, GARCH, VECM.
JEL:
N/A.