Abstract:
This study has explored the relationship between the Karachi Stock Exchange of Pakistan and
Monetary Policy announcements made by the State Bank of Pakistan. This study is a
quantitative research based on the secondary data taken from the websites of Karachi Stock
Exchange and State Bank of Pakistan. Event study technique is used in this research in order
to accomplish the objective. Sample period of 5 years is taken from 1st January 2009 to 31st
October 2013. State Bank of Pakistan has made total 27 announcements during the sample
period in which interest rates were increased, decreased and kept constant. Three different
methods are used to find the results. Results show that Karachi Stock Exchange does not
react to the monetary policy announcements made by the State Bank of Pakistan. Some
volatility in the returns of Karachi Stock Exchange has been found in the results but is very
little.
