Impact of Macroeconomic Variables on Stock Returns: Evidence from KSE-100 Index of Pakistan

Safdar Abbas, Safdar Hussain Tahir, Shahid Raza


Increasing attention is being paid to the relationship between macroeconomic variables and Karachi Stock Exchange (KSE-100) return. Inflation, exchange rate, GDP, gold prices and T-bills rate were taken as independent variables and KSE-100 index was taken as dependent variable. The monthly data of all independent variables Inflation, exchange rate, GDP, gold prices and T-Bills and dependent variable Stock Return was taken from January 2002 to December 2012.Descriptive Statistics showed KSE-100 index provide highest return with minimum stander deviation. Regression and correlation techniques were also used. Correlation showed that Stock Return was negatively correlated with each independent variable GDP, gold prices, Inflation, exchange rate and T-bill. All independent variables Inflation, T-bill, exchange rate, GDP and gold prices were positively correlated with each other’s. Regression results found that insignificant positive relationship of exchange rate and Stock Return. Gold prices have positive insignificant relation but GDP has insignificant negative relation with Stock Return. Inflation has significant negative relation with Stock Market Return. T-Bill has insignificant negative relationship with Stock Market.

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ISSN : 2251-1555