Abstract:
In this research work, the endeavor has been made to evaluate the stocks of commercial
banks thatare listing on Karachi Stock Exchange by usingthe past hypothetical and empirical literature on Macroeconomic factors and efficient markets. The objective of research study is to inspect theimpact of foreign exchange rates, KSE-100, volumes and days-of-the-week effect on returns of banking stocks. The main focus is around five currencies ratesthat including; US Dollar, British Pound, Canadian Dollar, Euro and Chinese Yuan which influence the performance of banking stocks in KSE. A sample size of nine commercial banks has been considered, by collecting data on daily basis over time period of 10 years (2004-2013). The econometric methods; pooled ordinary least square regression method, correlation coefficient and distribution pattern analysishave been employed to get accurate results in order to determine the relationship among all variables and their significant impact upon banking stock returns. The pooled OLS regression model identifies that significance of Monday is observed only through KSE-100 index on returns from banking stocks while no link among other days of the week have obtained whereas exchange rates, KSE-100 index and volumes have statistically significant positive relationship with stock returns. Whereas, individually the foreign exchange rates, KSE-100 index and volumes holds statistically perfect relationship with banking stock returns. The value of coefficient of determinants (R2) shows that only 7.5% variation in the stock returns are enlightened by independent variables along with the effect of days-of-the-weeks whereas 92.5% variation are remaining unexplained due to other factors as they are not considered in the model.
