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

Author

Listed:
  • Nadeem Iqbal
  • Sajid Rahman Khattak
  • Muhammad Arif Khattak

    ("Dimitrie Cantemir" Christian University)

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.

Suggested Citation

  • Nadeem Iqbal & Sajid Rahman Khattak & Muhammad Arif Khattak, 2013. "Relationship between Macroeconomic Variables and KSE-100 Index: Evidence from Pakistan," Knowledge Horizons - Economics, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(4), pages 101-105, December.
    • Handle: RePEc:khe:journl:v:5:y:2013:i:4:p:101-105
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    References listed on IDEAS

    as
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    3. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    4. 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 721-733, July.
    5. 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.
    6. 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.
    7. McElroy, Marjorie B & Burmeister, Edwin, 1988. "Arbitrage Pricing Theory as a Restricted Nonlinear Multivariate Regression Model: Iterated Nonlinear Seemingly Unrelated Regression Estimates," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(1), pages 29-42, January.
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    Cited by:

    1. Ali Umar Ahmad & Adam Abdullah & Zunaidah Sulong & Ahmad Tijjani Abdullahi, 2015. "The Review of Stock Returns and Macroeconomic Variables," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(5), pages 154-181, May.

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    More about this item

    Keywords

    Macroeconomic Variables; KSE.100 Index; ARDL; VECM; ADF; Pakistan;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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