Role of Sovereign Indicators in Performance of Stock Market of Pakistan

Jahanzaib Alvi^1, , Muhammad Rehan¹ and Saad Khatri¹

¹Mohammad Ali Jinnah University, Department of Management Sciences Karachi, Pakistan

Cite this paper:
Jahanzaib Alvi, Muhammad Rehan and Saad Khatri. Role of Sovereign Indicators in Performance of Stock Market of Pakistan. Journal of Finance and Economics. 2019; 7(2):52-61. doi: 10.12691/jfe-7-2-2

Abstract

The rationale of this research is to determine the influence of macroeconomic indicator (Interest Rate, Inflation Rate, and Exchange Rate) on KSE-100 Returns, 6 month Karachi Interbank Offered Rate (KIBOR) is taken as proxy of the interest rate, Consumer Price Index (CPI) is taken as proxy of the inflation rate, PKR to Dollar rate is take as representative of the exchange rate, the aim of this study is that, how Macroeconomic factors impact equity returns of the stock market in this research the time series data of 14 years was selected from January 30 2004 to February 10 2017 on monthly basis, whereas in this tenor the data of financial crisis is also included, Multiple Regression model is examined to test the hypothesis, entire data is collected from the reliable source, to test the multiple regression, software EVIEWS version 9.0 is used, the findings reveal that there is weak relationship between the Independent variables & Dependent Variable variables, however inflation rate have insignificant negative correlation with KSE-100 returns, interest rate and exchange rate both have negative significant relationship with KSE-100 returns, while investing into stock market of Pakistan investor must considered interest rate and exchange rate to earn lucrative profit, due to lake of resource this research could not cover the entire economic indicators and also could not stretched the tenor of 13 years, if any future research is conducted, so more variables can be taken to generate better results.

Keywords:
interest rate inflation rate exchange rate KSE-100 Index KIBOR

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