The Relationship Between Oil Prices, Exports and Equity Market in the context of Pakistan

Abstract

The main objective of our study is to explore the Relationship between oil Prices and trade on equity market in Pakistan. We have taken monthly data from 01 Jan 2013 to 31 Dec 2024. Using Simple linear regression analysis and pairwise correlation, the study examines the effect on the equity market of Pakistan, using secondary data from State Bank of Pakistan (SBP) and Investing.com. The key findings reveal the equity market (KSE-100) is influenced by oil price (OP) and export (EXP). The key findings revealed that both oil prices (OP) and export (EXP) has a negative correlation with equity market (KSE-100). The only control variable Gold and Foreign Exchange Reserves had a positive correlation on equity market (KSE-100) while consumer price index Inflation (CPI-INF) has negative correlation. The results show the oil price (OP) has a significant impact on equity market (KSE-100). It means productions cost rises due to fluctuation of oil prices, which decreases the value of stocks in equity market (KSE-100), also the behavior sentiment of the investor changes. While export has also a significant impact on equity market (KSE-100). It means the foreign demand of good and services increase in the global market, which in turn boost the investor confidence and demand of Pakistani good and services increases. It helps the Pakistani stocks to up rise in the equity market(KSE-100). the positive impact it is not sustainable to a major effect on the equity market in Pakistan. Consumer price index inflation (CPI-INF) is significant, which assist to understand the true effect on oil prices(OP) and export (EXP). Foreign exchange reserves (FER) is significant, when Pakistan’s reserves up rises it slightly gives a positive effect on the equity market and vice versa.