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Monetary Shocks or Real Shocks, Which matters the most for Share Prices

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  • Subhani, Muhammad Imtiaz
  • Osman, Ms. Amber

Abstract

This study examines that out of monetary shocks (ΔM2) and real shocks in share prices (ΔYt-k), which one or both really explain share prices of Karachi stock exchange 100 index. The time series econometrics is used to investigate the data for the monthly period of January 1991 to January 2011 for money supply (M2) and share prices of KSE 100 index. The results of unit root test reveal that there is a real shock in share prices and it explains the share price of KSE 100 index temporarily, while Vector auto regression revealed that Share prices of KSE 100 index is meagerly explained by the monetary shocks.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34730.

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Date of creation: 2011
Date of revision: 2011
Publication status: Published in Information Management and Business Review 6.2(2011): pp. 246-251
Handle: RePEc:pra:mprapa:34730

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Keywords: Share Prices; Real Shocks; Monetary Shocks; Unit Root Test; Granger Causality Test;

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  1. Pearce, Douglas K & Roley, V Vance, 1985. "Stock Prices and Economic News," The Journal of Business, University of Chicago Press, vol. 58(1), pages 49-67, January.
  2. Sara Alatiqi & Shokoofeh Fazel, . "Can Money Supply Predict Stock Prices?," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center.
  3. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  4. Kraft, John & Kraft, Arthur, 1977. "Determinants of Common Stock Prices: A Time Series Analysis," Journal of Finance, American Finance Association, vol. 32(2), pages 417-25, May.
  5. Fama, Eugene F, 1981. "Stock Returns, Real Activity, Inflation, and Money," American Economic Review, American Economic Association, vol. 71(4), pages 545-65, September.
  6. Subhani, Muhammad Imtiaz & Osman, Ms. Amber, 2011. "Stock Market Reactions due to Announcements of Consumer Price Index and the Investigation of Endogeneity," MPRA Paper 34725, University Library of Munich, Germany.
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Cited by:
  1. Hasan, Syed Akif & Subhani, Muhammad Imtiaz & Osman, Ms. Amber, 2012. "Fiscal Deficit cannot be reduced by increasing Taxes (A point to ponder from Pakistan)," MPRA Paper 35681, University Library of Munich, Germany.

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