Measurement of Stock Market Crisis & its Dimensions: Evidence from Pakistan


  • Mehwish Aziz Khan Lecturer, Department of Business Administration, Federal Urdu University of Arts, Science & Technology, Islamabad, Pakistan
  • Eatzaz Ahmad SBP Memorial Chair, School of Economics, Quaid-i-Azam University, Islamabad



Stock Market Crisis, CMAX, Intensity Of Crisis


This study explores the history of stock market crisis in the emerging market of Pakistan from different perspectives over the period July-1997 to December-2016. To identify and measure the timing of crises occurrence and their various dimensions (magnitude of crisis, days to recovery, duration of crisis, depth of crisis, size of crisis, etc.), CMAX methodology is employed. Thus, the study adds to existing literature by studying the Pakistani market in this regard and also proposing a method to quantify the intensity of crisis (within CMAX framework).  The results indicate that the two major crises of 1997-2002 and 2008-2012 are found to coincide with a number of major financial, economic and political crises in Pakistan and around the world.


Ahmed, S., & Farooq, O. (2008). The effect of 9/11 on the stock market volatility dynamics: Empirical evidence from a front line state. International Research Journal of Finance and Economics, 16, 71-83. Retrieved from

Ali, K. (2012, November 2). SECP to study 2008 stock market crash. Dawn. Retrieved from

Ali, S. I. (2017). Moral neutralization in Pakistan 's capital markets: A study of market abuse (Undergraduate Thesis). The Wharton School, University of Pennsylvania, United States. Retrieved from _scholars/154

Al?Rjoub, S. AM., & Azzam, H. (2012). Financial crises, stock returns and volatility in an emerging stock market: The case of Jordan. Journal of Economic Studies, 39(2), 178-211. doi:10.1108/01443581211222653

Chatterjee, S., Chiu, C., Duprey, T., & Hoke, S. H. (2017). A financial stress index for the United Kingdom. Bank of England Working Paper 697. Retrieved from s-index-for-the-united-kingdom.pdf?la=en&hash=D4B2767A56E17029181C8D9481 AAB6DF74605AD8

Cimpoeru, S. (2015). The challenge of measuring financial stress. Case study for identifying the macroeconomic triggers of financial crisis with panel data models. Ecoforum, 2(1). Retrieved from article/view/240/140

Equity market and the ‘feared’ month of May. (2002, June 17). Dawn. Retrieved from

Fatima, S. (2016). Corporate governance in Pakistan: Beyond a minimalist approach (Unpublished doctoral dissertation). University of Bedfordshire, United Kingdom. Retrieved from

Ghosh, S. R., & Ghosh, A. R. (2003). Structural vulnerabilities and currency crises. IMF Staff Papers, Palgrave Macmillan Journals, 50(3). Retrieved from

Haq, R. (2010, Sep 28). Pakistan's lost decade of the 1990s. Retrieved from

Haque, I. (2010). Pakistan: Causes and management of the 2008 economic crisis (Global Economic Series No. 22). Penang, Malaysia: Third World Network.

Illing, M., & Liu, Y. (2006). Measuring financial stress in a developed country: An application to Canada. Journal of Financial Stability, 2(3), 243-265. doi:10.1016/ j.jfs.2006.06.002

Indian market grows faster. (2007, June 9). Dawn. Retrieved from https://www.

Jacobsson, E. (2009). How to predict crashes in financial markets with the log-periodic power law (Master dissertation). Stockholm University, Sweden.

Javed, A. Y. (2007). Stock market reaction to catastrophic shock: Evidence from listed Pakistani firms. PIDE Working Papers 2007:37. Retrieved from

Javed, A. Y., & Ahmed, A. (1999). The response of Karachi stock exchange to nuclear detonation. The Pakistan Development Review, 38(4), 777-786.

Khan, M. Z. (1999). Liberalization and Economic Crisis in Pakistan. Vol. 9 - Pakistan. In Rising to the Challenge in Asia: A Study of Financial Markets (pp. 1-35). Manila, Philippines: Asian Development Bank.

Khan, N. (2017, July 6). KSE-100 index: A post-9/11 appraisal. Daily Times. Retrieved from

Kole, E. (2006). On Crises, Crashes and Comovements. Erasmus Research Institute of Management. Retrieved from

Ma, T., Lee, K. H., Lai, C. H., & Lee, Y. S. (2017). Rational or Irrational? A comprehensive studies on stock market crashes. doi:10.2139/ssrn.2905555

Mishkin, F. S., & White, E. N. (2002). U.S. stock market crashes and their aftermath: Implications for monetary policy. NBER Working Paper 8992.

Patel, S., & Sarkar, A. (1998). Crises in developed and emerging stock markets. Financial Analysts Journal, 54, 50-61. doi:10.2139/ssrn.76168

Raza, S., & Kemal, M. A. (2017). Daily stock market movements: from the lens of news and events. PIDE Working Papers 2017:146. Retrieved from

Siegel, J. J. (2003). What is an asset price bubble? An operational definition. European Financial Management, 9(1), 11-24. doi:10.1111/1468-036X.00206

Smith, V. L., Suchanek, G. L., & Williams, A. W. (1988). Bubbles, crashes, and endogenous expectations in experimental spot asset markets. Econometrica, 56(5), 1119-1151. Retrieved from

Sornette, D., Johansen, A., & Bouchaud, J. P. (1996). Stock market crashes, precursors and replicas. Journal de Physique I, 6(1), 167-175. doi:10.1051/jp1:1996135

Vila, A. (2000, March). Asset price crises and banking crises: Some empirical evidence. BIS Conference Paper, 232-252.

Zeeman, E. C. (1976). Catastrophe theory. Scientific American, 234(4), 65-83. doi:10. 1038/scientificamerican0476-65




How to Cite

Khan, M. A. ., & Ahmad, E. . (2020). Measurement of Stock Market Crisis & its Dimensions: Evidence from Pakistan. Review of Economics and Development Studies, 6(2), 289-299.