Behavior of Interest Rate (KIBOR) and KSE Responsiveness

Abstract

This research project examines the problem regarding interest rate specifically KIBOR prevailing in Karachi Stock Exchange, through examining the not familiar affect of KIBOR on KSE 100 index. This study is first of its kind in Bahria University Islamabad at MBA level to incorporate interest rate in the variance equations of E-VIEW test. The analysis is done on the very renowned index of Karachi stock exchange and one of the biggest indexes of Pakistan, KSE 100 index. To prove this problem we have to analyze some data which we have done through E-view testing. In this study KIBOR rates were considered as proxy for interest rate. The results reveal that there is no affect of interest rate KIBOR on stock prices of KSE 100index, this result is contradicting to what is generally known that whenever interest rate changes it causes a change in stock prices as well. This leads us to address this problem as interest rate is not treating KSE 100 index as it treats the developed nation’s exchanges. We tried to pin point some areas by which we can stabilize the affects that this problem has which is not looking severe at this time and could result in more problems if no solution is given with true implication