During the last few decades, the number of terrorist's attacks has been increased to a great extent in the world, which possibly enhances the fear of investors and influences long‐term investment commitments. It is important to explore how the financial market reacts to terror events in order to dictate the suitable policy recommendations. This study examines whether terrorism exerts a significant effect on stock market returns and volatility by examining the daily time series data for Pakistan from the period Oct 7,1999 to May 31, 2016. The employed econometric techniques in this study are the generalized autoregressive conditional heteroskedasticity (GARCH) and the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) models. The GARCH and EGARCH results confirm that terrorism has a significant effect on both the stock market returns and volatility in Pakistan. In addition, the EGARCH results also conclude that the negative shock (terror news) creates higher volatility as compared to positive shock (good news) in the stock market. The outcomes suggest that terror events significantly affect financial investors in the stock markets. The paper suggests that terror risk is an influential cognitive factor in describing the stock market returns and volatility. Terror must be addressed in order to achieve desirable stability in financial markets.

The study examines the macroeconomic variables impact on financial performance, using the financial statement of listed companies in Automobile sector of Pakistan stock exchange. The study covered the period from 2007 to 2016. Before applying the GMM model the preliminary test was done. Firm performance is measured with three ratios i.e., return on assets (ROA), return on equity (ROE) and gross profit margin ratio (GPM). The results revealed that the selected macroeconomics variables have the negative relationship with return on equity, return on assets and gross profit margin and the inflation has positive relation with return on equity and negative relation with return on assets (ROA) and gross profit margin (GPM).