Abstract:
Purpose
The research aims to study the impact of interest rates, exchange rates on the stock prices in
Pakistan. The key rationale behind this research is to verify whether the claimed relationship
between these variables as per literature available is statistically significant or not.
Methodology & Design
The research uses explanatory design, interpretivism research philosophy and deductive
approach of research. Further, it must be noted that quantitative data and secondaiy sources
are used for this research. The data has been analyzed using E-views and different statistical
tests have been applied.
Findings
The research finds that there is a significant impact of interest rate and exchange rates on the
stock prices in Pakistan as the null-hypothesis is rejected. In addition, the findings are
supported by the previous researches as well.
Limitations
First limitation relates to the type of data sources employed for this research as this research
uses secondary sources only. Secondly, it must be noted that the research has used quantitative
data from secondaiy sources only. Third limitation specific to the research relates to the
application of limited statistical tests out of a variety of options available. Fourth limitation is
that the research is focused on data from Pakistan only and this suggests that the research
findings are also applicable to the jurisdiction of Pakistan.
Recommendations
• The future researchers are recommended to study the impact of interest rate and
exchange rate on other stock indices.
• The investors in Pakistan and other countries are recommended to invest their funds
wisely and account for returns in different financial markets
• The monetaiy policy authorities in Pakistan are strongly recommended to consider all
the implications of interest rates before varying the interest rates as the movement in
interest rates in Pakistan is observed to be frequent.
• The regulatory authorities are required to consider all of these factors very wisely and
require them to regulate the financial markets as a whole as change relating to one
financial market has a significant impact on all other financial markets as well.
