The study examines the relationships between the KSE100 index and a set of macroeconomic variables\r\nover sampling period in January 1999 to June 2008. Co-integration, Granger causality and error\r\ncorrection tests were used to analyze the relationship between stock prices (KSE100 index) and\r\nmacroeconomic variables. The findings from the co-integrating tests suggested that stock prices and\r\nmacroeconomic variables were co-integrated and that at least a uni-directional causality exists between\r\nthe two sets of variables. The results further suggested that stock prices were positively related with\r\nmoney supply and short term interest rates and negatively related with inflation and foreign exchange\r\nreserves.
Loading....