IMPACT OF INTEREST RATE ON STOCK PERFORMANCE: A CASE OF BANKING INDUSTRY

Abstract

Purpose- The study is undertaken to know the impact of interest rate on the stock performance of banking industry of Pakistan. Big five banks were selected as sample and the stock performance was measured with the help of Stock Prices. Data of eight years is collected which covered the time period from January 2007 to December 2014. Methodology/saniple- Simple Linear Regression Model is used to analyze the relationship between Interest Rate and Stock Prices of all sample banks. Sample of five banks was used and data was taken for 32 quarters (March-2007-Dec-2014). Findings- The findings show that there is significant negative relationship between interest rate and stock prices, as interest rate increase, it decreases the stock prices of banks. Practical Implications- Interest Rate and Stock Market Performance are two main elements which contributes in the economic growth of country so there clear relationship will give a clear idea about the direction of economic growth of the country.