Abstract:
Purpose-This research paper was an endeavor to make a model, to find out the
connection involving stock market and interest rate (Pakistani market) and to run certain
tests related to statistical analysis. These tests run with the help of yearly end closing
stock prices of Karachi Stock Exchange and interest rates of previous ten years i.e. Jan
2003 to Dec 2013. Regression analysis and descriptive analysis were run to find out the
blow of interest rate on stock market of Pakistan. Performance of Pakistani Stock market
is highly dependent on political situation. The most important factor of any country’s
economy is its Stock market.
Methodology-The research is being conducted in order to find out if there is any
relationship between interest rate in prevailing economy and stock prices in Karachi
stock exchange therefore, the research design for study is qualitative “Exploratory
research”. For the purpose of analysis SPSS tools is used . Based on the literature
Hypothesis would be developed in order to make sure the adoptability of aim and
objective of the research.
Finding-There are three different model which have negative and positive impact on
stock markets. Here I am considering one model that has impact these are inversely
related with each other i.e. one percent increases in inflation increase stock index by
.83% .one percent increase in the last year value of stock index increase current year
stock index by 0.623%. interest rate and its impact on stock prices I have find out the fact
that there exists a negative kind of relationship between stock returns and the interest
rates. Although the settlement of interest rates are defined and formulated by the central
banking authority the SBP but it can harm the economy as a whole because, Pakistani
economy has always been in the transition phase.
