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Authors' Detailed Response to Reviewers

Ref.: ECOP-D-21-00598
Title: Nexus Between Economic Freedom and Sustainable Stock Market Development:
Comparative Evidences from ARDL & NARDL Modelling in Pakistan

Dear Editor,

We are thankful to you for inviting us to revise and resubmit our manuscript. Besides, we
are highly thankful for all the respectable and knowledgeable reviewers for their constructive
comments and feedback.

We have very closely followed the comments and guidelines provided to us in the review to
the best of our academic efforts. Below are our itemized responses to the comments from the
respected reviewers. The manuscript has significantly benefitted from your comments and
suggestions, and we trust this revision shall bring it closer to publication.

We sincerely thank you for giving us helpful suggestions to improve this paper. We have
implemented several requisite/necessary changes to address your comments and suggestions
(Changes are in red in the Original Paper attached). Moreover, we went through the
manuscript again to improve the language and quality of paper.

The itemized responses to your comments are as follows:

Reviewer #1:
The manuscript addresses an interesting topic for a broad audience. The presentation and
structure are in line and meet the standards of ECOP Journal. Some adjustment needs to
improve your manuscript.

Comment 1:
General remark: Revise shorten the title of the paper.

Reply to Comment 1:

First of All, Thank you for your valuable guidance. We have revised and shortened it as: -

“Symmetric and Asymmetric Nexus Between Economic Freedom and Stock Market
Development in Pakistan”

Comment 2:

Introduction

*       The entire manuscript should be edited for the English language and style. There are
many sentences which are not clear in your manuscript. The use of English language needs to
be improved.
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Reply To Comment 2:
Thank for this valuable observation. The entire manuscript has been edited and
updated according to your valued suggestions. The overall English language and Style has
also been improved.

Comment 3:
Literature review
*       Literature Review section needs to be improved by reading more recent articles related
to your topic and background. Compare your results with other related work.

Reply To Comment 3:

Thank you very much for your keen observation and suggestion. The entire section of
literature review has been updated with recent articles. The results have also been compared
with existing studies.

Comment 4:
Data Collection, Methodological Framework & Econometric Modelling
*[a]*       The English language must be improved. Some sentences are unclear.

Reply To 4 [a]:
Thank you for this comment. The English Language has been improved and unclear
sentences have been corrected.

Reply to 4:
*[b]*       Why you used both ARDL and NARDL models in your manuscript?

Reply To 4 [b]:
Thank you for this valuable query. As per existing studies, the results of ARDL and
NARDL are found different. And there is significant gap to compare the results of these two
methodologies. Therefore, in this study we used ARDL and NARDL to extensively discuss
the variations in the results. We believe that findings of this study will be helpful in
modifying or restructuring the policy formulation.

*[c]*       VECM? did you apply VECM also in your manuscript?

Reply To 4 [c]:
Thank you very much for highlighting this mistake. It was a typing mistake that has
been rectified. Actually, we have applied ECM as its result has been shown in Table-10,
[Serial-VIII]. It has been rectified in the Manuscript.

*[d]*       POS & NEG? this is not the right way to write like this

Reply To 4 [d]:
Thank you for this valuable suggestion. The statement “POS & NEG” has been
replaced with “Positive & Negative” throughout the paper.

*[e]* You have used three different models or selection of parameters combination? is
this right? Eq.1, Eq.2 and Eq.3
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Reply To 4[e]:

Thanks for this valued comment. We used three equations/models but earlier we did
not show all the results. We have added the missing results in respective tables [From Table-
1 to Table-10].

For simplicity and general understanding, we have added the respective titles in all
tables like [Model-I, Model-II & Model-III] accordingly in RED COLOR to further clarify
the Calculation of Models.

Comment 5:
Results & Discussion

*[a]*       Need some latest references to explain your discussion section.

Reply 5[a]
Thank you once again for highlighting this deficiency and your valuable input. Latest
references have been added to enrich the discussion section

*[b]* All tables including in the manuscript are not drawn carefully. I do not understand
how you can explain these kinds of tables.

Reply 5[b]
Thank you for this important suggestion. Tables have been revised as per journal
template.

*[c]*       Table 03 shows unit root test. Why you used DW-Stats? why you did not use (AIC
or SIC etc.)?

Reply 5[c]
Thank you very much for this important query. The purpose of Table-03 was to
present (i) predictive power & (ii) investigating stationarity only. The AIC, SIC & Hann Quin
Stats for the models have been added in Table-06, Table-08 & Table-9 for your Review.

Further, DW-stats and Adjusted R2 have been compared to locate any Spurious
Regression (if Adj R-Squared> DW-stats) in any model.

*[d]*       I did not find any (CointEq (-1) to ECM (-1) or ECT (-1) value in your model?

Reply 5[d]
Thank you for this valuable comment. We have added (CointEq (-1) *, that can be
seen in Table-10 (Serial-VIII] for ARDL & NARDL.

*[e]*       Fig. 2 and Fig. 3 are not clear? 2014 to 2020 data is explained?

Reply 5[e]
Thank you for indicating this important point Fig. 2 & Fig. 3 have been replaced with original
figures. The figures are extracted from the Eviews software that picks the automatically to
generate the CUSUM and CUSUM squares figures.
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*[f]*       There are not X and Y axis legends in all figures in the manuscript.

Reply 5[f]
Thank you again for indicating this point. Legends have been added in all figures [Figure-02
to Figure-07]

*[g]*      Table 09 also needs to be drawn again. What is the meaning of (K)? Why the value
is changing?

Reply 5 [g]
Thank you very much for this valuable review. Table-09 has been drawn and
included again in the paper. The value of (K=4) in Table-09 in ARDL indicates “number of
independent Variables”. In case of NARDL, the value of (K=8) indicates doubling the
number of Explanatory Variables into its positive & negative dynamic multipliers.

Comment 6:
conclusion
*       This section needs a little improvement

Reply to 6
Thank you for your valuable suggestion. We have followed your suggestion and
improved the conclusion.

Reviewer #2:
Comment # 1

The paper is interesting and well written.

Alas, there is a lot of factors, which affect performance of stock markets of any country.
Therefore, it is recommended to extend an overview of the factors, and only then start
analysis of relationship between stock markets performance and economic freedom.
Here are several recommended sources:

Masood, O., Javaria, K., Petrenko, Y. 2020. Terrorism activities influence on financial stock
markets: empirical evidence from United Kingdom, India, France, Pakistan, Spain and
America. Insights into Regional Development, 2(1), 443-
455. https://doi.org/10.9770/IRD.2020.2.1(4)

Kumaraswamy, S., Ebrahim, R.H., Wan Mohammad, W.M. 2019. Dividend policy and stock
price volatility in Indian capital market. Entrepreneurship and Sustainability Issues, 7(2),
862-874. http://doi.org/10.9770/jesi.2019.7.2(5)

Reply to Comment # 1
Thank you very much for your valuable observations and review. No doubt, there are
number of factors, that affect the performance of stock markets of any country. But based on
literature gap, our main focus is on economic freedom that is combination of 12 factors. We
have recommended some factors for future researchers. We have followed your
recommended studies and cited in the Manuscript.
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Comment # 2

Research limitations have to be described.

Reply to Comment # 2

Once again, we thank you for this important suggestion. Research limitations has been
mentioned in the end of manuscript and research significance has been improved in the last
paragraph of introduction section.

Comment # 3

 It is not recommended to use acronyms as keywords.

Reply to Comment # 3

Lastly, thanks for your suggestion. Acronyms from keywords have been deleted.

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Thanks again for your valuable and enriched suggestions regarding the improvement of
manuscript