Impact of Forein Reserves on Karachi Stock Exchange Market
iImpact of Foreign Reserves on Karachi stock exchange Market of Pakistan
Abstract
This paper explains the relationship between foreign exchange reserves of Pakistan and KSE market capitalization on the basis of quarterly gathered data from fiscal year 2001 to 2009. Both of the variables under consideration are very important because foreign exchange reserve is one out of the major supports to stable the value of home currency against foreign currencies and market capitalization shows the overall investment in stock market. This study uses simple linear regression model to measure the relationship between these two important variables. Results of this study show that there is positive (not significant positive) relationship between variables. The results show that foreign exchange reserves of Pakistan have a positive impact on KSE Stock Market that is the principal stock market of Pakistan.
Introduction
This research is carried out to find the impact of foreign exchange reserves held by the State Bank of Pakistan on the investment and performance of stock markets of Pakistan. There are three stock exchanges (Karachi Stock Exchange, Lahore Stock Exchange and Islam-Abad Stock Exchange) operating in Pakistan. Karachi Stock Exchange (KSE) is premier, biggest and the most popular stock market of the country, so it is used as representative of all stock exchanges of Pakistan.
About KSE
KSE is hub of capital formation in Pakistan, established on September 18, 1947. KSE started with 5 companies with a paid up capital of Rs. 37 million. The first index was the 50 index and trading was done through open-out-cry system.
In spite of political issues, social, financial and other problems, it played a key role in the economy of Pakistan. KSE 100-index showed a return of 40.19% and became the sixth best performer among the emerging markets in the calendar year 2007. It achieved a major milestone by touching of KSE-100 Index psychological level of 15,000 for the first time
Abstract
This paper explains the relationship between foreign exchange reserves of Pakistan and KSE market capitalization on the basis of quarterly gathered data from fiscal year 2001 to 2009. Both of the variables under consideration are very important because foreign exchange reserve is one out of the major supports to stable the value of home currency against foreign currencies and market capitalization shows the overall investment in stock market. This study uses simple linear regression model to measure the relationship between these two important variables. Results of this study show that there is positive (not significant positive) relationship between variables. The results show that foreign exchange reserves of Pakistan have a positive impact on KSE Stock Market that is the principal stock market of Pakistan.
Introduction
This research is carried out to find the impact of foreign exchange reserves held by the State Bank of Pakistan on the investment and performance of stock markets of Pakistan. There are three stock exchanges (Karachi Stock Exchange, Lahore Stock Exchange and Islam-Abad Stock Exchange) operating in Pakistan. Karachi Stock Exchange (KSE) is premier, biggest and the most popular stock market of the country, so it is used as representative of all stock exchanges of Pakistan.
About KSE
KSE is hub of capital formation in Pakistan, established on September 18, 1947. KSE started with 5 companies with a paid up capital of Rs. 37 million. The first index was the 50 index and trading was done through open-out-cry system.
In spite of political issues, social, financial and other problems, it played a key role in the economy of Pakistan. KSE 100-index showed a return of 40.19% and became the sixth best performer among the emerging markets in the calendar year 2007. It achieved a major milestone by touching of KSE-100 Index psychological level of 15,000 for the first time
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