Downside systematic risk can be measured by two approaches,

Downside systematic risk can be measured by two approaches, the first one emphasize on literature analyzes downside risk by focusing on the information contained in market data. The second approach of the literature investigates downside risk by focusing on the application of various econometric techniques.Starting with the first stream of the literature, Giot (2005) found a positive relation between theVIX and future S&P 100 index returns. Fung (2007) also concluded that, corresponding to a 1997 stock market crash in Hong Kong, future realized volatility was well forecast by implied volatility. Later, Coudert and Gex (2008) suggested that risk-aversion indicators, including the VIX, are superior leading indicators of stock market crises, while Chung et al. (2011) demonstrated that the information contained not in the VIX but in VIX options improved the predictive power of the returns, volatility, and density of the S&P 500.In other work, Berger and Pukthuanthong (2012) extended the Pukthuanthong and Roll (2009)Measure of market integration to provide a systemic risk estimate within international stock markets. They also suggested that an increase in their risk measure indicated a greater likelihood of global market crashes.1 Li et al. (2015) suggested that the information embedded in S&P 500 options and futures was useful for predicting financial crises.2 However, in all of these studies, comparison of the downside risk predictive power of implied volatility and that of the volatility forecasts from several GARCH models was not a focus.Terrorism socio-political index:Terrorism and Political instability has long standing history of adverse effect on economic growth. The economic down runs as result of the political instability triggered uncertainty in stock market which further effect the stock prices. Political events and terrorism are the key driving forces behind the stock market volatility. Kim and Mei (2001) measure the impact of various political announcement which effect the stock return and he also acknowledge the level of uncertainty due these announcements. They assessed political events for 1989 to 1993 and their impact on Hong Kong hang sang index. The result revealed that those events have a significant impact on the returns and volatility.Political instability can be measured by two approaches, the first one emphasize on executive instability, while the second option is based on social unrest and political violence (Alesina & Perotti, 1996).The first approach measures political instability as a propensity to observe government changes. The change can constitutional or unconstitutional. The basic assumption behind this approach is that change in leadership is associated with uncertainty regarding policy making like fiscal policy and monetary policy for the country (Cukierman, Edwards, & Tabellini, 1989; Londregan & Poole, 1990). Further, Malik, Hussain, and Ahmed (2009) analyzed the impact of president Musharraf resignation on Pakistan stock market. The study reveals a significant influence over capital market. Likewise,Mahmood et al., (2014)argued that imminent threat of Political events can’t be ignored.Moreover, Bilal, Talib, Haq, Khan, and Islam (2012); Hanan et al., (2012) studied the impactof macroeconomic factors, terrorism and catastrophes on the performance of Pakistan stock exchange (KSE-100 index). Sohail and Zakir (2011) investigated the impact of macroeconomic variables on KSE-100 index both in short and long run. The results revealed that there is a positive influence of inflation, GDP and exchange rate on the index while money supply had an adverse effect on the stock return.¬†¬†Thus from the above dissection we can conclude that political instability put an adverse effect on the country economy, investor can face huge losses and we see in the recent example what happen in Pakistan stock market, that the index fall due to the change in the executive position ie Prime Minister of Pakistan, investor also face huge losses in the foam when an terrorist attack happen in the country so it lead to consequently, increasing investor exposure