An Examination of the relationship between gold prices, Oil prices, Exchange rates & Interest rates with Stock rerun’s in Pakistan

Abstract

With the increased acquaintance and interest in investing, investors are getting more conscious about gaining the knowledge regarding which markets offers the relatively more secure investment opportunities in this volatile and uncertain environment. Therefore this research project pursues to find out and analyze the impact of the four of the most important and discussed variables that can have impact on the stock market returns including currency exchange rate, gold prices, oil prices and interest rates. The data of these variables has been taken from Pakistani market for the period of 2008 to 2015. This paper analyzes the short-term and the long-term impact of these variables on stock returns individually as well as their combined effect. The study is structured as follows: the first section specifies contextual information about the research study and what has been uncovered by researchers throughout the world in explaining the relationship between the chosen variables and then the variables are discussed; the second section is about the research methodology and a theoretical framework. Then this paper progresses to the results by using some major and basic types of analysis tools of statistics i.e. Correlation, Simple Regression Modelling and Multiple Regression Modelling and Descriptive Statistics, gives an exhaustive investigation and comparison of data gathered with the already prevalent literature in this regard. In the end, our research study settles with the hypothesis testing, with concluding remarks and possible reasoning of the relationship between the variables. Keywords: Correlation, Multiple Regression Model, Stock Market, Interest Rate, Karachi Stock Exchange and KSE-100 Index, Oil returns, Gold returns, Forex returns.