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Impact of Macroeconomic Variables on Stock Prices

IMPACT OF MACROECONOMIC VARIABLES ON STOCK PRICES : EMPIRICAL EVIDENCE FROM SOUTH ASIAN COUNTRIES

 DEPARTMENT OF BANKING AND FINANCE

A Project Submitted to the Department of Banking and Finance In Partial Fulfillment of the requirement for the Degree of BBA Banking and Finance

ABSTRACT

Stock prices play a vital role in the economy growth Movement in the stock prices strongly effect in economy growth. A collapse in stock prices has cause of economy disruption. The objective is to investigate the impact of exchange rate and oil prices on stock prices of south Asian countries. The study based on monthly data from period July 1997 to July 2013. Exchange rate and oil price are independent variables while stock price is dependent variable. Descriptive statistics, correlation analysis and regression model applied for analysis. In Regression analysis oil prices show positive significant impact on Pakistan, Afghanistan, Maldives and Indians stock prices. The impact of exchange rate on stock prices of Bangladesh, Srilanka, Maldives is positive significant but exchange rate effect inversely on Afghanistan stock prices. Oil prices have negative significant impact on Colombo and Dhaka stock exchange prices. Although the significant relationship mostly not exist between dependent (Stock prices) and independent variables (Exchange and oil prices) future researcher should include domestic country variables to check the impact on stock exchange prices.

Keywords: Exchange Rates, Oil Prices, Stock Prices, Descriptive Statistics, Regression Analysis. Pakistan, Bangladesh, Afghanistan, Srilanka, Maldives, India

DECLARATION

I hereby declare that this submission is our own work and that, to the best of our knowledge and belief, it contains no material previously published or written by another person nor material which has been accepted for the award of any other degree or diploma of the university or other institute of higher learning, except where due acknowledgment has been made in the text. We therefore, understand and transfer the copy rights for this material to the Department of Banking and Finance, Government College University, Faisalabad. I also understand that if evidence of plagiarism is found in my project at any stage, even after the award of a degree, the work may be cancelled and the degree revoked.

Signature ______________                               Name:

PROJECT COMPLETION CERTIFICATE

It is certified that the project entitled Impact of Macroeconomic Variables on Stock Prices: Empirical Evidence from South Asian Countries has been completed by the Student under the supervision of Suervisor. It is also certified that the project is based on original research work and meets all criteria and standards laid down for BBA degree.

The following areas have been critically monitored:-

  1. Conformance to APA Format.
  2. Precision & Correctness of the language.
  3. Literature Review is relevant and comprehensive.
  4. Relevance of references with the text.
  5. Methodology and Estimation techniques are appropriate

Signature:  ———————————–

Name: ————-

Designation: –Lecturer——————–

The undersigned certify that they have read the following project, examined the defense and are satisfied with the overall exam performance, and recommend the project to Department of Banking and Finance for acceptance.

Project Title: IMPACT OF MACRO ECONOMIC VARIABLES ON STOCK PRICES: EMPIRICAL EVIDENCE FROM SOUTH ASIAN COUNTRIES

DEDICATION

We want to dedicate this research work to our Parents, whose belief and encouragement motivate us to complete of work on time. Their prayers and support always being a source of guidance in the turbulence mode of our lives and give us the strength to face the ups and down in life

ACKNOWLEDGEMENT

All the praises and acclamation for Almighty Allah The benevolent that knows mysteries and secrets of universe and His Holy Prophet (S.A.W) Whose blessings enabled me to pursue higher goals of life and Whose teachings have served as beacon for the humanity in the hours of despair and darkness.

We are heartily thankful to our supervisor, whose encouragement, guidance and support from the initial to the final level enabled us to develop an understanding of the subject. He has left no stone unturned during the supervision of this project. I would also like to acknowledge my dear friends for their encouragement and cooperation.

Last but not least, ordinary words of appreciation do not cover my parent’s true love and their guidance at every corner of my life. Their keen interest, prayers, and encouragement have been a very strong support for me and enabled me to finish my project in time. I also owe my thanks to all others who encouraged and helped me throughout my research work.

TABLE OF CONTENTS
  • CHAPTER: 1
    • INTRODUCTION
    • 1.1 Background of The Study
    • 1.2 Objective of the study
    • 1.3 Research questioner
    • 1.4 Organization of the study
  • CHAPTER: 2
    • LITERATURE REVIEW
  • CHAPTER: 3
    • DATA & RESEARCH METHODOLOGY
    • 3.1 Data
    • 3.2 Explanation of variables
    • 3.3 Theoretical Framework
    • 3.4 Research Methodology
  • Chapter: 4
    • ANALYSIS AND INTERPRETATION
  • CHAPTER: 5
  • CONCLUSION POLICY IMPLICATIONS AND FUTURE DIRECTIONS
  • Conclusion
  • Policy Implication
  • Future Direction
  • References

 LIST OF TABLES & FIGURES                                                                            

Table-1A Descriptive Statistics  ………………….……………………………….. 15
Table-1B Correlation Analysis ……….………………………………………………….16
Table-1C Regression Analysis  ……………………………………………………………..17
Table-2A Descriptive Statistics  …………………………………………………….18
Table-2B Correlation Analysis………………………………………………………19
Table-2C Regression Analysis…………………………………………………………..19
Table-3A Descriptive Statistics ……………………………………………………..20
Table-3B Correlation Analysis  ……………………………………………………………21
Table-3C Regression Analysis …………………………………………………………….21
Table-4A Descriptive Statistics ………….………………………………………………..23
Table-4B Correlation Analysis…………………………..……………………………24
Table-4C Regression Analysis……………………………..………………………24
Table-5A Descriptive Statistics……………………………..……………………..25

Table-5B       Correlation Analysis………………………………………………..26

Table-5C       Regression Analysis……………………………………………….26

Table-6A       Descriptive Statistics……………………………………………….28

Table-6B       Correlation Analysis……………………………………………….29

Table-6C       Regression Analysis…………………………………………….…29

ABBREVIATIONS

  • ARIMA= Auto Regressive Integrated Moving Average
  • ER= Exchange Rate
  • FDI= Foreign Direct Investment
  • GDP= Gross Domestic Product
  • INT= Interest Rate
  • KSE= Karachi Stock Exchange
  • OP= Oil Prices

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