A study based on a Relationship between Interest rate and Share Price : A study of 10 Companies Listed on Pakistan Stock Exchange (PSX), Pakistan

Abstract

This research is done to evaluate the relationship between one of the factors of macroeconomic variable with share market index. The factor we selected is the interest rate. Is the interest rate has any impact on share market index of Pakistan? This is the question which is focused on this research throughout. Official interest rates lists and share market index for the year 2003 to 2014 has been taken from stock market of Pakistan, for analysis. Pakistan evidence suggests that interest rate has a negative relationship with share prices or the impact of interest rate is very significant related to share market index. This research used econometric techniques and methods to evaluate the relationship between selected variables. Like descriptive statistics, correlation test and most important tool which is used in this study is regression analysis. The descriptive statistics include standard deviation; maximum, minimum mean, median mode and on the other hand correlation and covariance test help us in identifying the relationship status between these two variables. In a last regression analysis assists to determine how much quantity of a variable is defined by the independent variables. On the other hand coefficient can explain the change in dependent variable due to the change in single units of the independent variable.