INFORMATION EFFICIENCY OF PSX AMID MACROECONOMIC TURBULENCE: A REASSESSMENT WITH ASYMMETRIC COINTEGRATION ANALYSIS

This study aims to reinvestigate the informational efficiency of PSX (Pakistan Stock Exchange) in both the short and long run, extending the sample from previous research with the incorporation of post pandemic dynamics. The study evaluates eight (8) Macroeconomic variables to examine their impact on PSX stock returns. Utilizing an updated monthly dataset from a time period covering January 1992 to June 2026, the study employs VECM (Vector Error Correction Mode), unit-root tests, NARDL (Nonlinear ARDL) and ARDL (Autoregressive Distributed Lag) bounds testing, Johansen cointegration to apprehend possible asymmetric impact. Granger causality, variance decomposition, and impulse response functions are applied to examine causality within and beyond the sample period. Empirical results found that Pakistan Stock Exchange remains informationally inefficient. Investors can easily take advantage of predictable stock returns pattern linked to macroeconomic variables, specifically exchange-rate shocks, inflation and money supply. This is among the prior study to combine traditional (classical) cointegration techniques with asymmetric NARDL analysis on a Pakistan Stock Exchange (PSX) dataset of 34 years sheathing the recent PSX upturn of 2023-2026. Keywords – PSX, NARDL, ARDL, Efficiency, stock returns, post-pandemic, macroeconomic variables, GDP, Inflation.