Pakistan Stock Exchange and Macroeconomic Indicators

A Case Study of KSE 100 Index


  • Ammar Siddiqui School of Business Sciences, University of Witwatersrand
  • Athar Iqbal Iqra University, Karachi



Stock, Returns, Macroeconomic, Economy, Growth


This study has found a relatively strong and consistent response of stock market returns to Pakistan’s macroeconomic indicators. It was observed that the variables that have been set were seen to be in a stationary motion. The economic model used, provided that there has been a strong relation that was occurring in between the variables that had been studied. As the movements in the KSE-100 index are a significant indicator of the Pakistan economy, this study particularly examine the impact of macroeconomic indicators on Karachi Stock Exchange-100 index. For analysis, yearly data from December 1991 to December 2017 was used in this specific study. The result reflects that there was a negative impact of internal and external debt, inflation, GDP, foreign direct investment on KSE-100 index, while, exchange rate and interest rate had a significant positive effect on the KSE-100 index. Moreover, money supply found out to be a variable which has no influence on KSE-100 index. The results of vector auto regression revealed that out of eight macroeconomic variables only money supply could be excluded in future research as it has no impact on KSE-100 index.


Download data is not yet available.

Author Biographies

Ammar Siddiqui, School of Business Sciences, University of Witwatersrand

School of Business Sciences
University of the Witwatersrand, Johannesburg

Athar Iqbal, Iqra University, Karachi

Assistant Professor
Iqra University


Abdalla and V. Murinde (1997), Exchange rate and stock price interactions in emerging financial markets: Evidence on India, Korea, Pakistan and the Philippines. Applied Financial Economics, 7(1), 25-35.

Abdullah and S. C. Hayworth (1993), Macro econometrics of stock price fluctuations. Quarterly Journal of Business and Economics, 32(1), 49-63.

Aggarwal (1981), Exchange rates and stock prices: A study of the US capital markets under floating exchange rates. Akron Business and Economic Review, 12, 7-12.

Bahmani Oskooee and A. Sohrabian (1992), Stock prices and the effective exchange rate of the Dollar. Applied Economics, 24, 459-464.

Chatrath, S. Ramchander and F. Song (1997), Stock prices, inflation and output: evidence from India. Applied Financial Economics, 7(4), 439-445.

Dickey and W. A. Fuller (1981), Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49, 1057-72.

Eva and M. Stenius (1997), 'Macroeconomic volatility and stock market volatility: empirical evidence on finish data. Applied Financial Economics, 7(4), 419-426.

Farooq and D. W. W. Keung (2004), Linkage between stock market prices and exchange rate: A causality analysis for Pakistan. The Pakistan Development Review, 43(4), 639-649.

Hartmann and C. Pierdzioch (2007), Stock returns, exchange rate movements and central bank interventions. Applied Financial Economics Letters, 3(3), 191-195.

Hill, W. Griffiths and G. Judge (2001), Undergraduate Econometrics, 2nd edition. Wiley, New York, 335-338.

Homma, Y. Tsutsui and U. Benzion (2005), Exchange rate and stock prices in Japan. Applied Financial Economics, 15(7), 469-478.

Humpe and P. Macmillan (2009), Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan. Applied Financial Economics, 19(2), 111-19.

Johansen and K. Juselius (1990), Maximum likelihood estimation and inference on cointegration with applications to the demand of money. Oxford Bulletin of Economics and Statistics, 52, 169-210.

Kwiatkowski, P. C. B. Phillips, P. Schmidt and Y. Shin (1992), Testing the null hypothesis of trend stationary. Journal of Econometrics, 54, 159-178.

Liu and P. Sinclair (2008), Does the linkage between stock market performance and economic growth vary across Greater China? Applied Economics Letters, 15(7), 505-508.

Nishat and R. Shaheen (2004), Macroeconomic factors and Pakistani equity market. The Pakistan Development Review, 43(4), 619-637.

Phillips and Perron (1988), Testing for a Unit Root in Time Series Regression. Biometrika, 335-346.

Shahbaz, M., N. Ahmed and L. Ali (2008), Stock market development and economic growth: ARDL causality in Pakistan. Journal of Finance and Economics, 14, 182-195.



How to Cite

Siddiqui, A. ., & Iqbal, A. . (2020). Pakistan Stock Exchange and Macroeconomic Indicators: A Case Study of KSE 100 Index. Karachi University Business Research Journal, 1(1), 25–37.