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The Impact of Macroeconomic Variables on Stock Market Returns A Case of Pakistan

Author Affiliations

  • 1Department of Banking and Finance, Government College University, Faisalabad, PAKISTAN
  • 2 Army Public College of Management and Sciences (APCOMS), Rawalpindi, PAKISTAN
  • 3 Department of Business Administration, University of Sargodha, Sargodha, PAKISTAN

Res. J. Management Sci., Volume 3, Issue (8), Pages 1-7, August,6 (2014)


The efficient stock market organizes the investments and triggers the savings development, which direct to economic actions in a countryside. The main purpose of stock market is to perform as moderator among investor and borrowers. The stock market and different macroeconomic variables are closely related with each other. Studies show that stock market is inclined by change in macroeconomic variables. This research project observes the influence of five macroeconomic variables i.e. Inflation, GDP Per Capita, GDP savings, Money supply and Exchange rate at KSE 100 index of Pakistan. The annual data of 23 years from 1991 to 2013 was used in this study. To achieve the objectives we used the Descriptive Analysis, Correlation Analysis, Granger Causality test and Regression Analysis. The consequences of Granger Causality test shows that the GDP savings and Exchange rate does unidirectional Granger Cause Money supply. On other side GDP savings also unidirectional Granger Cause the KSE. The results of Regression Analysis show that the Inflation, Exchange rate, Money supply, GDP per capita and GDP savings has positive significant impact on KSE 100 index. Hence, it is recommended that government should obtain counteractive actions to manage inflation. The consequences could give some upcoming to company executive, depositor and strategy manufacturer.


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