Stock Market in Pakistan

This article provides an overview of the main indicators of Pakistan’s stock market development and their possible relevance for real economic activity focusing on the post-liberalisation period. The aspects of the market investigated include liberalisation of the market, integration of the market with the global markets, microstructure issues of trading and settlement mechanism and corporate governance issues. A comparison with a selected set of emerging and developed markets reveals that the Pakistani stock market is small in size and a relatively insignificant source of capital mobilisation. These factors limit the role of the stock market in boosting economic activity. Also, the market seems to be excessively volatile owing to noise traders and speculators. On a positive note, the market seems to yield enormous gains to investors which compensate for higher market volatility. Also, the relative segmentation of the market makes it a potential venue for international diversification. JEL Classification: G10, G15