Abstract
The key determination of the present research is to examine the impact of selected major variables on stock return of the Pakistani emerging capital market Karachi Stock Exchange. The researches display that capital market is inclined by transform in major economic variables. This study observes impact of three major economic variables i.e. foreign direct investment, foreign exchange rateand inflation at Karachi stock exchange. The monthly data of ten years practice in this study. To reach the objectives, study uses the Ordinary Least Square (OLS) to estimate the correlation and regression model. The Durbin-Watson statistics 1.90 value indication that there are no serial correlations issues in study.And results show that significant negative impact of inflation and Foreign exchange rate &foreign direct investment negative insignificant impact on KSE dependent variable. And overall model good fit by probability of F-statistics which less than 5%.
Highlights
In capital markets, the stock price determent by micro factors in short & long run e.g. financial & liquidity position of firm, profit or loss declare and dividend announcement etc
Statistical technique unit root tests obtained using the AugmentedDickey Fuller and KPSS (Kwiatkowski-Phillips-Schmidt-Shin) tests the results show that foreign reserves had positive effect on stock exchange development
Statistical Regression and Co-integration applied and found result that the Historically stock prices (SP) predicts the current fluctuation in stock prices (SP) and it predict the current fluctuation of National exports while there are no impact on current values of imports by the historically stock prices (SP) or historically stock prices are not predicting the current fluctuation in imports of Pakistan
Summary
The stock price determent by micro factors in short & long run e.g. financial & liquidity position of firm, profit or loss declare and dividend announcement etc. Some major economic factors influence i.e. foreign direct investment, inflation, industrial production, interest rate, savings, foreign exchange reserves, gross domestic product, exchange rate, money supply, imports & exports of goods & services and oil & gold prices fluctuation in international markets, used by various researchers. Of listed companies in capital market and as well affected by micro and major economic factors. These factor representations study the sensitivity of an equity &debenture return as a role of one or more factors. The capital market and a mixture of variables are directly related with each one other
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