The Impact of Macro-economic Factors on Equity Market Return of Pakistan Stock
Exchange (PSE)


Volume 8, Issue 1
Asma Zeeshan

Published online: 28 June 2022
Article Views: 20
 
AbstractReferencesCite
The study examines the impact of macroeconomic variables such as Interest Rate (IR), inflation, Exchange Rate (ER) and Foreign Direct Investment (FDI) over Pakistan Stock Exchange (PSE) returns. Mainly secondary data used in the research process. The study consists of data for the period of 12years started from 2006 till 2018. For this purpose, monthly data of PSE-100 index has been observed for the period 2006 to 2018. The market returns have been calculated through the opening and closing index value of each month. The FDI, inflation, IR, and ER has been taken as independent variables. Hypotheses have been tested to find out whether there exists a significant relationship between the Stock market return and macroeconomic variables or not. To test this hypothesis, Regression analysis used and results are calculated through Eviews software.

  1. Abbas, S., Tahir, S. H., & Raza, S. (2015). Impact of macroeconomic variables on stock returns: Evidence from KSE-100 Index of Pakistan. Research Journal of Economic and Business and Studies, 3(7), 70–77.
  2. Adam, A., Houkari, M., & Laurent, J.-P. (2008). Spectral risk measures and portfolio selection. Journal of Banking & Finance, 32(9), 1870–1882. doi:https://doi.org/10.1016/j.jbankfin.2007.12.032
  3. Ahmed, S. (2008). Aggregate economic variables and stock markets in India. International Research Journal of Finance and Economics (14), 141–164.
  4. Ali, A., Ahmad-Ur-Rehman, M., Haq, I. U., Jam, F. A., Ghafoor, M. B., & Azeem, M. U. (2010). Perceived organizational support and psychological empowerment. European Journal of Social Sciences, 17(2), 186–192.
  5. Aurangzeb, D. (2012). Factors affecting performance of stock market: Evidence from south Asian countries. International Journal of Academic Research in Business and Social Sciences, 2(9), 1–15.
  6. Bekiros, S. D., & Georgoutsos, D. A. (2008). Extreme returns and the contagion effect between the foreign exchange and the stock market: Evidence from Cyprus. Applied Financial Economics, 18(3), 239–254. doi:https://doi.org/10.1080/09603100601018823
  7. Erdem, C., Arslan, C. K., & Sema Erdem, M. (2005). Effects of macroeconomic variables on Istanbul stock exchange indexes. Applied Financial Economics, 15(14), 987–994. doi:https://doi.org/10.1080/09603100500120365
  8. Farooq, A. J. T. I. K., Farooq, A., Rauf, A. S., & Sharan, K. (2012). Neuroticism and job outcomes: Mediating effects of perceived organizational politics. African Journal of Business Management, 6(7), 2508–2515. doi:https://doi.org/10.5897/AJBM10.1609
  9. Fraser, P., & Groenewold, N. (2000). The effect of exchange rate shocks on the volatility of Australian sector excess returns: A note. Applied Economics Letters, 7(2), 77–81. doi:https://doi.org/10.1080/135048500351852
  10. Galbraith, W., & Jelley, J. (1955). Light-pulses from the night sky and cerenkov radiation: Part i. Journal of Atmospheric and Terrestrial Physics, 6(1-6), 250–262. doi:https://doi.org/10.1016/0021-9169(55)90038-6
  11. Hassan, G. M., & Holmes, M. J. (2013). Remittances and the real effective exchange rate. Applied Economics, 45(35), 4959–4970. doi:https://doi.org/10.1080/00036846.2013.808311
  12. Hussainey, K. (2009). The impact of macroeconomic indicators on Vietnamese stock prices. The Journal of Risk Finance, 10(4), 321-332. doi:https://doi.org/10.1108/15265940910980632
  13. Ibrahim, M. H., & Aziz, H. (2003). Macroeconomic variables and the Malaysian equity market: A view through rolling subsamples. Journal of Economic Studies, 30(1), 6-27. doi:https://doi.org/10.1108/01443580310455241
  14. Khan, T. I., Jam, F. A., Akbar, A., Khan, M. B., & Hijazi, S. T. (2011). Job involvement as predictor of employee commitment: Evidence from Pakistan. International Journal of Business and Management, 6(4), 252-262.doi:https://doi.org/10.5539/ijbm.v6n4p252
  15. Kyereboah-Coleman, A., & Agyire-Tettey, K. F. (2008). Impact of macroeconomic indicators on stock market performance: The case of the Ghana stock exchange. The Journal of Risk Finance, 9(4), 365-378. doi:https://doi.org/10.1108/15265940810895025
  16. Liu, M.-H., & Shrestha, K. M. (2008). Analysis of the long-term relationship between macro-economic variables and the Chinese stock market using heteroscedastic cointegration. Managerial Finance, 34(11), 744-755. doi:https://doi.org/10.1108/03074350810900479
  17. Menike, L. (2006). The effect of macroeconomic variables on stock prices in emerging Sri Lankan stock market. Sabaragamuwa University Journal, 6(1), 50-67. doi:http://doi.org/10.4038/suslj.v6i1.1689
  18. Naik, P. K., & Padhi, P. (2012). Interaction of macroeconomic factors and stock market index: Empirical evidence from Indian data. Retrieved from https://bit.ly/3P0tef2
  19. Nelson, C. R., & Plosser, C. R. (1982). Trends and random walks in macroeconmic time series: Some evidence and implications. Journal of Monetary Economics, 10(2), 139–162. doi:https://doi.org/10.1016/0304-3932(82)90012-5
  20. Qazi, A., Raj, R. G., Tahir, M., Waheed, M., Khan, S. U. R., & Abraham, A. (2014). A preliminary investigation of user perception and behavioral intention for different review types: Customers and designers perspective. The Scientific World Journal, 2014, 1-8. doi:https://doi.org/10.1155/2014/872929
  21. Ray, H., & Sarkar, J. (2014). Macroeconomic link to Indian capital market: A post-liberalization evidence. Modern Economy, 5, 272-288. doi:https://doi.org/10.4236/me.2014.54028
  22. Ross, S. A. (1976). The arbitrage theory of capital asset pricing. Journal of Economic Theory, 13(3), 341-360. doi:https://doi.org/10.1016/0022-0531(76)90046-6
  23. Sanni, S. A., Ngah, Z. A., Karim, N. H. A., Abdullah, N., & Waheed, M. (2013). Using the diffusion of innovation concept to explain the factors that contribute to the adoption rate of e-journal publishing. Serials Review, 39(4), 250–257. doi:https://doi.org/10.1016/j.serrev.2013.10.001
  24. Serfling, M. A., & Miljkovic, D. (2011). Time series analysis of the relationships among (macro) economic variables, the dividend yield and the price level of the S&P 500 index. Applied Financial Economics, 21(15), 1117–1134. doi:https://doi.org/10.1080/09603107.2011.562167
  25. Shahbaz, M., Jam, F. A., Bibi, S., & Loganathan, N. (2016). Multivariate granger causality between co2 emissions, energy intensity and economic growth in Portugal: Evidence from cointegration and causality analysis. Technological and Economic Development of Economy, 22(1), 47–74. doi:https://doi.org/10.3846/20294913.2014.989932
  26. Singh, S., & Jotwani, D. (2012). The effect of macroeconomic variables on stock prices: A conceptual framework of the arbitrage pricing theory. Ganpat University-Faculty of Management Studies Journal of Management and Research, 5, 1-16.
  27. Sohail, N., & Hussain, Z. (2009). Long-run and short-run relationship between macroeconomic variables and stock prices in Pakistan: The case of Lahore stock exchange. Pakistan Economic and Social Review, 47(2), 183–198.
  28. Talla, J. T. (2013). Impact of macroeconomic variables on the stock market prices of the Stockholm stock exchange (OMXS30) (Mastert’s thesis). Jonkoping International Business School.
  29. Uddin, M. G. S., & Alam, M. M. (2007). The impacts of interest rate on stock market: Empirical evidence from Dhaka stock exchange. South Asian Journal of Management and Sciences, 1(2), 123–132.
  30. Ullah, H., Fida, A., & Khan, S. (2012). The impact of ownership structure on dividend policy evidence from emerging markets KSE-100 Index Pakistan. International Journal of Business and Social Science, 3(9), 298-307.
  31. Wachter, J. A. (2013). Can time-varying risk of rare disasters explain aggregate stock market volatility? The Journal of Finance, 68(3), 987–1035. doi:https://doi.org/10.1111/jofi.12018
  32. Wickremasinghe, G. (2011). The Sri Lankan stock market and the macroeconomy: An empirical investigation. Studies in Economics and Finance, 28(3), 179-195. doi:https://doi.org/10.1108/10867371111141954
Zeeshan, A. (2022). The impact of macro-economic factors on equity market return of Pakistan Stock Exchange (PSE). International Journal of Business and Administrative Studies, 8(2), 91-104. doi: https://dx.doi.org/10.20469/ijbas.8.10004-2