Abstract
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.
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