Impact of CPEC on PSX and Shanghai Stock Exchange Market Volatility Using GARCH Method

In 2013, Chinese government decided to initiate economic corridors, this initiative was named as One Belt One Road (OBOR) by Chinese government. OBOR initiative consisted of multiple corridors, including China-Pakistan Economic Corridor (CPEC). Our focus of this research paper is CPEC. CPEC implementation consists of different projects, these projects are related to energy, road infrastructure and improvements and extension to existing railroad. CPEC lead projects and investments are expected to uplift Pakistan and Chinese economy and accelerate overall economic growth. CPEC lead projects and investments are also expected to also have an impact on stock market returns and volatility. Our research aims to find that is the growth rate of Pakistan Stock Exchange (PSX) Stock Market returns has been driven by CPEC factor. This paper presents results of CPEC announcement on market volatility due to CPEC lead 54 billion USD investments in Pakistan. Results show that volatility has decreased in post CPEC compared to pre CPEC period. In post CPEC period Pakistan Stock Exchange (PSX) Stock Market returns volatility has decreased and market has become more stable. Pakistan Stock Exchange (PSX) Stock Market is more favourable for investors in post CPEC scenario.