Relationship Between Exchange Rate, KIBOR, Interest Rate and Stock Prices in Karachi Stock Market

Abstract

Stock markets are one of the indicators of investment in an economy. These contribute a handsome portion towards economic development of a country (Ali, Rehman, yilmaz, & Khan, 2010).In Pakistan, three stock exchanges are registered. These are Karachi stock exchange, Lahore stock exchange and Islamabad stock exchange. Karachi stock exchange is the biggest stock market of Pakistan with 360 listed companies. KSE 100 index shows daily performance of stocks in market and calculated on daily basis (Ali, Rehman, yilmaz, & Khan, 2010). Stock market represents the daily inflow and outflow of capital in different sectors of business. It also depicts the movement of stock prices of different companies. Price trends change with the change in prices of stocks and it is difficult to determine the stock prices on the basis of past data, if there is high volatility in stock market (Anderson, Garling, Hedesttrom, & Anders, 2012). There are a number of factors that result movement of stock prices. Stock prices move up and down due to the forces of demand and supply. But there can be some other factors that may cause the fluctuation of stock prices. Stock exchanges are key indicators of financial performance and also an important component of corporate finance and economy, due to this reason these have gained much importance for global economy and global financial markets (Ali, Rehman, yilmaz, & Khan, 2010).