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The Impact of Macroeconomic Variables on Stock Prices in Pakistan

Author

Listed:
  • Hunjra, Ahmed Imran
  • Chani, Muhammad Irfan
  • Ijaz, Muhammad Shahzad
  • Farooq, Muhammad
  • Khan, Kamran

Abstract

Purpose: The macroeconomic variables are crucial for any change in economy for a country. Any abrupt change among these variables has impact on the economy in various ways. In case of any change the regulatory authority take steps and make amendment in their policies that would put the economy on development track. The aim of the study is to determine the impact of interest rate, exchange rate, and GDP and inflation rate on stock prices in Pakistan. The monthly data of eleven years ranges from 1st January, 2001 to December 31th 2011 was used for this research study. Methodology: Granger causality and cointegration tests are applied on the data to estimate the possible impact of macroeconomic variables on stock prices. Findings: The findings of the study revealed that there is no relationship between dependent variable and explanatory variables in short run. On the other hand results show that there is strong relationship in long run. Recommendations: It is concluded that in long run there is significant relationship between macroeconomic variables on stock prices.

Suggested Citation

  • Hunjra, Ahmed Imran & Chani, Muhammad Irfan & Ijaz, Muhammad Shahzad & Farooq, Muhammad & Khan, Kamran, 2014. "The Impact of Macroeconomic Variables on Stock Prices in Pakistan," MPRA Paper 60791, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60791
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    References listed on IDEAS

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    6. Fredynandy M. John & Zakayo S. Kisava, 2018. "The Relationship between Stock Prices and Exchange Rates: The Focus on Dar Es Salaam Stock Exchange (DSE)," Business and Economic Research, Macrothink Institute, vol. 8(1), pages 1-12, March.

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    More about this item

    Keywords

    Interest rate; Exchange rate; Inflation rate; GDP; Stock prices;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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