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Relationship between Macroeconomic Variables and KSE-100 Index: Evidence from Pakistan

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Author Info

  • Nadeem Iqbal

    ()

  • Sajid Rahman Khattak

    ()

  • Muhammad Arif Khattak

    ()
    ("Dimitrie Cantemir" Christian University)

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    Abstract

    The present study aim to investigate the relationship of macroeconomic variables on stock returns in Pakistan. The study used monthly data from January 2001 to December 2010. For data analysis different econometrics model were used such as auto regressive distributed lag (ARDL), augmented dickey fuller (ADF), vector error correction model (VECM) are used. The study found that there is short as well as long run relationship exists between macroeconomic variables and stock returns. Money supply, exchange rate, and consumer price index have significant long run relationship with stock prices, while oil prices have no significance relations with stock returns. In short run money supply and exchange has positive significant relation with stock returns, while consumer price index and oil prices have no significant relation with stock returns.

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    File URL: http://orizonturi.ucdc.ro/arhiva/2013_khe_4_pdf/khe_vol_5_iss_4_101to105.pdf
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    File URL: http://orizonturi.ucdc.ro/arhiva/2013_khe_4_pdf/khe_vol_5_iss_4_101to105.pdf
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    Bibliographic Info

    Article provided by Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest in its journal Knowledge Horizons - Economics.

    Volume (Year): 5 (2013)
    Issue (Month): 4 (December)
    Pages: 101-105

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    Handle: RePEc:khe:journl:v:5:y:2013:i:4:p:101-105

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    Related research

    Keywords: Macroeconomic Variables; KSE.100 Index; ARDL; VECM; ADF; Pakistan;

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    References

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    1. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    2. Chen, Nai-fu, 1983. " Some Empirical Tests of the Theory of Arbitrage Pricing," Journal of Finance, American Finance Association, vol. 38(5), pages 1393-1414, December.
    3. Hsain, Fazal & Mahmood, Tariq, 2001. "The Stock Market and the Economy in Pakistan," MPRA Paper 2721, University Library of Munich, Germany.
    4. Beenstock, Michael & Chan, Kam-Fai, 1988. "Economic Forces in the London Stock Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 50(1), pages 27-39, February.
    5. Burmeister, Edwin & McElroy, Marjorie B, 1988. " Joint Estimation of Factor Sensitivities and Risk Premia for the Arbitrage Pricing Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 721-33, July.
    6. Amihud, Yakov, 1996. "Unexpected Inflation and Stock Returns Revisited--Evidence from Israel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 22-33, February.
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