Macroeconomic Determinants of Stock Price Variations: An Economic Analysis of KSE-100 Index

Altaf Hussain; Musrat Rafique; Ambar Khalil; Maryam Nawaz

doi:10.52131/pjhss.2013.0101.0003

Authors

Altaf Hussain The Islamia University of Bahawalpur, Pakistan. https://orcid.org/0000-0001-7382-9918
Musrat Rafique The Islamia University of Bahawalpur, Pakistan.
Ambar Khalil The Islamia University of Bahawalpur, Pakistan.
Maryam Nawaz National College of Business Administration & Economics, Lahore, Multan Campus.

DOI:

https://doi.org/10.52131/pjhss.2013.0101.0003

Keywords:

Macroeconomics, Financial Markets, Stock Exchanges, Index, Cointegration, VECM, Time Series, Stationary Series

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 the KSE-100 Index as a proxy of stock price variation for the period of 1992:01 to 2012:04 are taken for the empirical investigation. The Johansen cointegration test and VECM are used for this purpose. The analysis of this study specifies that foreign direct investment, interest rates, exports, and unemployment rates have a significant and negative impact on the KSE-100 index, while money supply has been found to be a significant and positive determinant of stock prices. On the other hand, gross domestic product has a positive but insignificant impact on stock prices in Pakistan.