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Macroeconomic Determinants Of Stock Price Variations: An Economic Analysis Of Kse-100 Index

Author

Listed:
  • Altaf Hussain
  • Musrat Rafique
  • Ambar Khalil

    (Department of Economics, The Islamia University of Bahawalpur, Pakistan.)

  • Maryam Nawaz

    (National College of Business Administration & Economics, Lahore, Multan Campus.)

Abstract

The main objective of this study is to assess the macroeconomic determinants of stock price variability in Pakistan. The quarterly data on macroeconomic variables (Gross Domestic Product, Foreign Direct Investment, Interest Rates, Exports, Money Supply and Unemployment Rate) and KSE-100 Index as proxy of stock price variation for the period of 1992:01 to 2012:04 is taken for the empirical investigation. Johansen co-integration test and VECM is used for this purpose. The analysis of this study specifies that the foreign direct investment, interest rates, export and unemployment rate have significant and negative impact on KSE-100 index, while money supply has found to be a significant and positive determinant of stock prices. On the other hand gross domestic product have a positive but insignificant impact on stock prices in Pakistan.

Suggested Citation

  • Altaf Hussain & Musrat Rafique & Ambar Khalil & Maryam Nawaz, 2013. "Macroeconomic Determinants Of Stock Price Variations: An Economic Analysis Of Kse-100 Index," Pakistan Journal of Humanities and Social Sciences, International Research Alliance for Sustainable Development (iRASD), vol. 1(1), pages 28-46, June.
    • Handle: RePEc:ani:ipjhss:v:1:y:2013:i:1:p:28-46
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    References listed on IDEAS

    as
    1. Arshad Hasan & Zafar Mueen Nasir, 2008. "Macroeconomic Factors and Equity Prices: An Empirical Investigation by Using ARDL Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 501-513.
    2. Pramod Kumar, Naik & Puja, Padhi, 2012. "The impact of Macroeconomic Fundamentals on Stock Prices revisited: An Evidence from Indian Data," MPRA Paper 38980, University Library of Munich, Germany.
    3. Mondher bellalah & Umie Habiba, 2013. "Impact of Macroeconomic Factors on Stock Exchange Prices: Evidence from USA Japan and China," THEMA Working Papers 2013-15, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. Adam, Anokye M. & Tweneboah, George, 2008. "Macroeconomic Factors and Stock Market Movement: Evidence from Ghana," MPRA Paper 11256, University Library of Munich, Germany.
    6. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    7. World Bank, 2013. "World Development Indicators 2013," World Bank Publications - Books, The World Bank Group, number 13191, December.
    8. Karam Pal & Ruhee Mittal, 2011. "Impact of macroeconomic indicators on Indian capital markets," Journal of Risk Finance, Emerald Group Publishing, vol. 12(2), pages 84-97, March.
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    Cited by:

    1. Camilleri, Silvio John & Scicluna, Nicolanne & Bai, Ye, 2019. "Do stock markets lead or lag macroeconomic variables? Evidence from select European countries," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 170-186.

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    More about this item

    Keywords

    Macroeconomics; Financial Markets; Stock Exchanges; Index; Cointegration; VECM; Time Series; Stationary Series;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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